UK foreign secretary Jeremy Hunt, stated that worries remain about a hard Brexit however, more EU states realize now what a mistake that would be and everyone needed to prepare for “chaotic no-deal Brexit”. He also stated that there would be a significant short term impact on financial markets in case of a no deal Brexit. His Latvian counterpart Edgars Rinkevics, stated that he estimates the possibility of reaching a deal until end of March at 50%. Should there be further negative headlines about Brexit we could see the pound weakening.

Cable moved in a sideways manner yesterday between the 1.2660 (S1) support line and the 1.2770 (R1) resistance line. The pair seems to be threatening the downward trend-line incepted since the 2nd of August and should it clearly break it, we would lift our bearish bias in favour of a sideways movement. Should the bulls take over we could see the pair, breaking the prementioned downward trend-line, break the 1.2770 (R1) resistance line and aim for the 1.2825 (R2) resistance hurdle. Should the bears have the upper hand on the pair’s direction, we could see the pair breaking the 1.2660 (S1) support line and aim for the 1.2590 (S2) support barrier.

US and China to resume negotiations

According to media, in a statement of China’s ministry of commerce it is stated that a delegation will be sent to the US for talks in late August. The delegation is to be led by Vice Commerce Minister Wang Shouwen and to meet with a US team led by David Malpass under Secretary of the Treasury, after a US invitation. Analysts see the possibility of a slight de-escalation, after several rounds of a tit for tat tariffs between the two countries. We could be in for a preparatory meeting and negotiations between the two parts. Should there be further positive headlines about the issue we could see the USD weakening somewhat temporarily.

AUD/USD broke the downward trend line incepted since the 8th of August yesterday and tested the 0.7265 (R1), during today’s Asian session. We see the case for the pair to start slowly rising as the USD could weaken on trade war news. Should traders favor the pair’s long positions we could see the pair breaking the 0.7265 (R1) resistance line and aim for the 0.7325 (R2) resistance area. On the other hand, should the pair come under selling interest, we could see the pair aiming if not breaking the 0.7200(S1) support line.

In today’s economic highlights:

In the European morning we get the UKs Retail Sales growth rates for July, while in the American session we get from the US the number of housing starts for July and the Philly Fed manufacturing index for August.

GBP/USD

• Support: 1.2660 (S1), 1.2590 (S2), 1.2500 (S3)

• Resistance: 1.2770 (R1), 1.2825 (R2), 1.2895 (R3)

AUD/USD

• Support: 0.7200 (S1), 0.7160 (S2), 0.7125 (S3)

• Resistance: 0.7265 (R1), 0.7325 (R2), 0.7382 (R3)