Pound drops as UK Parliament defeats Brexit schedule

The pound weakened since yesterday, as the UK Parliament defeated the governments’ tight time table for the UK Parliament to approve all necessary proceedings about Brexit. It should be noted though that before that, the UK Parliament voted in favour of Boris Johnson’s Brexit plan. The overall effect is expected to be initially a delay in Brexit on the one hand, yet at the same time the risk of a no deal Brexit seems to be fading away. Across the Chanel, the EU seems to be preparing to grant an extension of the Brexit date, until the 31st of January, yet one could expect some flexibility on the issue in case the UK is able to ratify the deal before that. In the UK political scene, UK’s Prime Minister, could be preparing to call an election in order to gain the majority required in the UK Parliament. Also, there is a possibility that the UK Parliament may approve alterations in Johnson’s Brexit deal of such an extent that could change the very nature of it. Overall, we see the approval of the deal as a positive, indicative that such a deal could ultimately pass at the UK Parliament, yet at the same time retain some worries about the possible changes the UK Parliament may approve, such as a second referendum. We expect the pound to remain Brexit driven and should there be negative headlines, we could see it weakening further and vice versa. Cable dropped yesterday, breaking the 1.2885 (R1) support line, now turned to resistance. As the pair broke the upward trendline incepted since the 11th of October, we switch our bullish outlook. Technically speaking, as the pair also broke the 1.2885 line, we tend to be bearishly predisposed for the pair’s direction. It should be noted the pair stabilised somewhat below the 1.2885 (R1) resistance line during the Asian session, yesterday, implying that either direction is possible. The RSI indicator in the 4-hour chart seems to concur with an indecisive market, about the pair’s direction, as it is at the reading of 50. Should the bears dictate the pair’s direction, we could see it breaking the 1.2760 (S1) support line, aiming for lower grounds. Should the bulls take over, we could cable, breaking the 1.2885 (R1) resistance line, aiming for the 1.3010 (R2).

…while the USD catches up with the Aussie…

The Aussie and the Kiwi, retreat against the USD yesterday as the risk appetite, seems to have weakened somewhat. Analysts tend to note that both antipodean currencies may have weakened also due to the recent Brexit developments. On the other hand, one should note that Chinese officials have stated that China will not close the doors to foreign investment and the global industry, despite trade frictions with the US. The statement could be verifying China’s intentions to remain an open economy, yet at the same time predisposes market participants, that the negotiations with the US as well as trade frictions could drag on for a long period of time. Given the small number of financial releases, we expect the Aussie to be more fundamentally driven. AUD/USD weakened since yesterday, distancing itself from the 0.6860 (R1) resistance line. As the pair failed to break the prementioned resistance level, despite continuously testing it, we tend to be more bearishly inclined about the pair’s direction. Should the pair come under the selling interest of the market, we could see the pair aiming if not breaking the 0.6800 (S1) support line. Should the pair find fresh buying orders along its path, we could see it breaking the 0.6860 (R1) resistance line and aim for the 0.6910 (R2) resistance level.

Other economic highlights today and early tomorrow

In today’s American session, we get Canada’s wholesale sales growth rate for August, Eurozone’s preliminary Consumer Confidence for October and the EIA weekly crude oil inventories figure. During tomorrow’s Asian session, we get Australia’s and Japan’s preliminary Manufacturing PMI’s for October. As for speakers please note that ECB’s Andrea Enria is scheduled to speak.

GBP/USD 4 Hour