London Forex Report: Cable Crumbles As Confidence in May Craters

London Forex Report: Cable Crumbles As Confidence in May Craters

London Forex Report: An eventful week is upon us with several important events upcoming, including a two-day scrutiny of UK’s Brexit Bill by the MPs on 14 – 15 November, though it may result in a deadlock scenario given the contentious EUR60bn “fine” UK has to pay in order to leave the EU. The Brexit day, as coined as the day UK finally leaves, is at 11pm London Time on March 29, 2019. Forty UK MPs are said to have agreed to sign a letter of no confidence in PM May, according to a UK press report. Forty eight signatures are required to force a leader ship vote. The most recent report on PM May, followed prior reports that there were over two dozen parliament members that were said to be prepared to call for her to resign.

Elsewhere, watch for remarks from a handful of Fed speakers including outgoing chair Janet Yellen, who is slated to speak on a European Central Bank panel on Tuesday, alongside ECB chief Mario Draghi, Bank of Japan governor Haruhiko Kuroda and Bank of England’s Mark Carney. The speeches come at a time of uncertainty on the outlook for US monetary policy as Jay Powell will replace Ms Yellen as the chair from February and after New York Fed president Bill Dudley announced his early retirement earlier this month. Importantly, any hints that Yellen might stay on the Board of Governors after she passes the Chair baton to Powell would be particularly market moving.

NORTH AMERICA US University Michigan consumer sentiments defied expectations for a rise and fell 2.9 points to 97.8 in November, remaining near its highest in 13 years nevertheless. This month’s pullback form a 13- year high was dented by softer confidence over both current conditions and future expectations as consumers were weighed down by higher inflation and prospects of further increase in interest rates. Delay in Trump’s tax plan could further dampen consumer optimism in our view, keeping a lid on consumer spending going forward.

EUROPE ECB’s Nowotny reaffirmed the view that QE should end next September, if the economy allows, notes guidance does not allow for a rate increase before 2019. French (stronger) and Italian (weaker) industrial production data had little impact on spot. UK data was mixed end of last week. Industrial production grew at a faster than expected pace of 2.5% YoY in September, supported by sustained gains in manufacturing and rebounds in mining & quarrying, electricity and oil & gas. On the contrary, construction output decelerated more than expected to increase only 1.1% YoY in September, its smallest gain in three months and fell the most in 18 months on a MoM basis, by tracking weakness in the housing market. Visible trade deficit narrowed to £11.3bn in September, as exports rose at a faster pace of 4.5% MoM vs the 0.4% MoM increase in imports. The bigger deficit in 3Q implied exports would be a drag on overall economic growth but NIESR GDP estimate showed growth in the UK economy is quickening in October.

ASIA US President Trump’s trip to Asia winds down this week with him attending the East-Asia Summit and US-Asean meetings in Philippines on Monday and Tuesday. Thus far, the trip has been a largely controlled showing from Trump, with some positive outcomes from trade deals. On the data front Japan tertiary industry index extended its decline in September, falling 0.2% MoM led by declines in activities of wholesale trade, medical & healthcare, and information & services, suggesting a still soft services sector and domestic consumption.

EURUSD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish

Technical: 1-3 Day View –Second leg of broader correction underway targeting 1.1471 near term expect 1.1685 to act as resistance, only a move north of 1.1750 reasserts upside objectives.

1-3 Week View – 1.2130 the next upside objective. Weekly close below 1.16 neutralises bullish objectives opening a test of 1.14
Retail Sentiment: Neutral
Trading Take-away: Neutral

GBPUSD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Neutral

Technical: 1-3 Day View – Retest of 1.3330 sees a sharp reversal and price now testing broader range support at 1.3030 a failure here opens 1.2750 as the next downside objective, near term resistance is sited at 1.3185

1-3 Week View – 1.3263 achieved as this acts as support 1.3836 is the next upside objective only a close back below 1.30 would jeopardise the bullish advance.
Retail Sentiment: Neutral
Trading Take-away: Neutral

USDJPY
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bullish

Technical: 1-3 Day View – 114.50 achieved as pivotal support at 113.30/10 caps corrective downside expect a test of 115, a closing breach of 113 concerns the bullish bias

1-3 Week View – As 108.40 equidistant swing support survives on a weekly closing basis bulls will look for a grind higher to retest 115, a close below 108 negates the broader bullish theme and opens the psychological 100 magnet
Retail Sentiment: Neutral
Trading Take-away: Neutral

EURJPY
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Neutral

Technical: 1-3 Day View – The breach of range support at 132 concerns the broader bullish bias, however without sustained daily closes below this level the risk remains a return to middle of the 134.50 /131.50 range, below 131.50 opens 130.66

1-3 Week View – 136.10 is the principle upside objective as this area caps the current advance expect a retest of 131.50 to set a base for the next leg higher, a closing breach of 131 concerns the bullish basissis.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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