London Forex Report: Positive Brexit Breakthrough, Pound Bid

London Forex Report: Positive Brexit Breakthrough, Pound Bid

London Forex Report: Global risk appetite may stay on the back burner for now, as the overnight tech sell-off on Wall Street (as Facebook led FANG stocks lower) suggests some trader caution ahead of the key FOMC policy meeting mid-week, whilst the Treasury bonds largely unchanged. Meanwhile, the UK and EU agreed on a 21 month status quo Brexit transitional deal, and a Reuters report suggested that ECB officials were shifting the debate from asset purchases to the interest rate trajectory, which fuelled the GBP and EUR respectively. RBA minutes adopted a positive tone in mentioning that domestic business conditions continued to improve while employment grew strongly. It added that “forward-looking indicators suggested that spare capacity in the labour market would continue to decline gradually (and) wage growth was expected to rise gradually.” Overall, GDP growth in 2018 is expected to “exceed potential growth” while CPI is expected to “increase gradually to be a little above 2.0%”

NORTH AMERICA According to a Bloomberg report citing Washington Post, US President Trump’s attorneys have provided the special counsel’s office with written descriptions that chronicle key moments under investigation in hopes of curtailing the scope of a presidential interview.

EUROPE Trade surplus in the Eurozone narrowed to €19.9b in Jan-18 (Dec: 23.2b revised). Import grew 1.1% % MoM (Dec: +0.7%) while export dropped 0.7% MoM (Dec: +1.7%) indicating that global demand for European goods softened, possibly on the back of a strong euro. In a separate release, construction output dipped for the first time in 7 months by 2.2% MoM (Dec: +0.7%) which coincides with other recent economic readings in January as industrial production fell more than expected. In a positive development for UK’s Brexit negotiations, UK and EU agree to terms for Brexit transition period which will last from Brexit day on 29 March 2019 to 31 December 2020. Within this deal, EU citizens arriving in the UK between these two dates will enjoy the same rights and guarantees as those who arrive before Brexit. UK will also be able to negotiate, sign and ratify its own trade deals during the transition period while Northern Ireland will effectively stay in parts of the single market and the customs union in the absence of other solutions to avoid a hard border. Chief EU negotiator Michel Barnier hailed as a decisive step while Brexit Secretary David Davis said a good deal was now closer than ever. That said, the deal remains contingent that a solution to the Irish border is found, and Barnier reminded reporters on Monday that “nothing is agreed until everything is agreed.” Note that the transition agreement will not be legally binding until the final withdrawal treaty is signed and that treaty will not be until next year (2019).

ASIA In its release of the summary of opinions of Bank of Japan (BOJ) board members, several members at its recent March MPM said that the central bank needs to stick with its QE as inflation remains well below the 2% target. One member shared concerns about further yen strength and the effect of recent stock market declines. One said that “the BOJ is not at the point where it can consider normalising, but the BOJ should explain that normalising is not the same as tightening policy.” A more detailed release of the March MPM minutes will be available on 07 May

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

Technical: 1-3 Day View – Range continues contracting the daily close above 1.2330 opens 1.2548, this near term upside objective would be neutralised with a daily close below 1.2250.

1-3 Week View – As 1.2130 now acts as support expect a test of 1.2635 as the next upside objective. Weekly close below 1.19 neutralises bullish objectives opening a test of 1.14.
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: 1-3 Day View – The daily close over 1.3925 sees price testing the anticipated 1.4093 resistance, as 1.3990 supports 1.4145 is the next upside target.

1-3 Week View – As 1.3650 supports 1.45 becomes the next upside objective, only a close back below 1.34 would jeopardise the bullish advance.
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: 1-3 Day View – As 108.44 acts as resistance 103.22 is the next downside objective, near term resistance is sited at 107, with near term support sited at 106.04

1-3 Week View – The close below 108 negates the broader bullish theme and opens the psychological 100 magnet as the next downside objective, only a close above 108.50 stabilises the pair, opening 112.50
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: 1-3 Day View – Breach of 131 sets a top to target 128.50 as 132.70 acts as resistance. A close over 133 stabilises the pair opening a retest of 135

1-3 Week View – The closing breach of 131 concerns the bullish consolidation bias opening a test of 128.50 while this area supports there is a window to retest and breach cycle highs above 137
Retail Sentiment: Neutral
Trading Take-away: Neutral

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