Daily Commentary | 10/10/2018
Pound gains on Brexit news
The pound strengthened on Tuesday, as media reported that in the Brexit negotiations, the UK and the EU were making progress. The report, out by Dow Jones, mentioned that a deal could be struck and divorce terms could be met by next week. Analysts point out, that the deal may be struck as early as Monday and the news could keep supporting the pound for now. On the other hand, the Irish border issue seems to remain unsolved and could provide for a bumpy road towards Brexit. The actual date of a possible agreement becomes critical, as on the 17th of October the European Council will meet to discuss Brexit and could indirectly ratify a possible agreement. Should there be further headlines about Brexit, we could see volatility continuing to exist for the pound.
Cable strengthened on Tuesday, breaking the 1.3150 (S1) resistance line, now turned to support. Should the good news about Brexit continue to reel in, we could see further support being provided for the pound, while the financial releases forecasts regarding the pound, could weaken it. Should the bulls dictate the pair’s direction we could see the pair breaking the 1.3215 (R1) resistance line, while if the bears take over, the pair could break the 1.3150 (S1) support line and aim for the 1.3080 (S2) support barrier.
US Dollar weakens as US bond yields drop
The US Dollar weakened against a number of its counterparts yesterday, as US bond yields retreated from their earlier highs this week. Indicative of the drop, would be the 10 year treasury yield which retreated from 3.248% to 3.210%. Analysts point out that the US Dollar’s recent rally was also supported by the rising yields however yesterday’s weakening of the USD, may prove to be short lived and the greenback may start rising again. It should also be noted that the common currency had initially weakened against the USD yesterday, despite Italy’s Finance minister stating that Italy would do whatever it takes to restore calm in the market. Never the less the American session turned the tables on the pair and volatility could continue at least for the short term.
EUR/USD as mentioned rose in yesterday’s American and today’s Asian session, but remained below the 1.1525 (R1) resistance line. The pair could continue to rise, however the bears may be hiding just around the corner as the financial releases in today’s American session, could favor the USD side of the pair or if there are further negative headlines about the Italian budget issue. Should the pair come under selling interest, we could see it breaking the 1.1480 (S1) support line and aim if not break the 1.1420 (S2) support level. If the pair finds fresh buying orders along its path, we could see it breaking the 1.1525 (R1) resistance line and aim for the 1.1577 (R2) resistance hurdle.
In today’s other economic highlights:
During the European session, we get Norway’s CPI rate for September and from the UK the trade balance figure, the GDP growth rate and the manufacturing output growth rate, all for August. In the American session, from the US we get the PPI rates for September as well as the API weekly crude oil inventories figure and from Canada we get the building permits growth rate for August. As for speakers, Chicago Fed President Charles Evans speaks.
Support: 1.1480 (S1), 1.1420 (S2), 1.1360 (S3)
Resistance: 1.1525 (R1), 1.1577 (R2), 1.1630 (R3)
Support: 1.3150 (S1), 1.3080 (S2), 1.3030 (S3)
Resistance: 1.3215 (R1), 1.3285 (R2), 1.3360 (R3)