New York Forex Report: Brexit Bounce For British Pound

New York Forex Report: Brexit Bounce For British Pound

New York Forex Report: UK centric session, at least from a headline perspective. Following yesterday’s GBP sell-off, possibly related to Scottish Parliament voting to make a formal request to Westminster for a second independence referendum we’re set to see PM Theresa May trigger Article 50, following PMQs, at which point Sir Tim Barrow will deliver a signed letter to EU Council President Donald Tusk. The activation of this will initiate the two-year process of the UK leaving the EU, paving the way for negotiations of exit terms, development of the new relationship and discussions over any prospective transitional arrangements. Given that the event has been well flagged, UK rates and GBP are at mid-range levels and there is unlikely to be any new information of significance, hence relatively little market impact Elsewhere, US Fed speakers scheduled to appear today include Rosengren, Williams and Evans, although only the latter is a voter this year. Evans, a moderate dove, recently suggested that persistent uncertainty around inflation and government spending could see two hikes as more appropriate for this year.

USD US data flow which reinforced the case of continuous recovery in the US economy also helped offer some relieves to investors. Consumer confidence rallied to a 16-year high in March while house prices continued to gain momentum, and manufacturing activities in the Richmond district rose to its best level in seven years. On Fed speak, nothing much from Yellen on policy guidance but Fed Vice Chair Fischer said that two more rate hikes this year “seem about right”, echoing the Fed projections. Kansas City Fed Esther George said that “monetary policy is at the point where the economy is able to sustain growth” but it is important that accommodation is removed in a “gradual but deliberate fashion”, pointing to tighter monetary path later this year. The Dollar Index rallied going into US afternoon, climbing 0.55% to 99.78

EUR ECB’s Weidmann said he thought there was a risk that QE could last longer than required, in contrary, ECB chief economist Praet stated that it was premature to talk about exiting stimulus. He urged policy makers to look through the recent gains in inflation. In EZ political news, the newest poll from Ipsos show French presidential candidate Macron is safely in the lead in the second round of voting gathering 62% of votes vs populist Marine Le Pen.

GBP With the official onset of Brexit, extensive negotiations over the next two years will follow to hammer out the terms of departure for the UK. As Brexit may possibly be one of the most covered events by the media for the past year, downside risks to the GBP may come in the form of uncertainties regarding unexpectedly tough EU terms of exit. The Scottish Parliament will voted to hold a second referendum on independence from the UK.

JPY Japan’s data came out disappointing as the Feb retail trade grew by just +0.1%YoY (easing from +1.0% in Jan and well missing the forecast of 0.7%) while retail sales increased just 0.2%MoM in Feb and made worse by the downward revised 0.2% increase in Jan (from 0.5% previously). Department stores and supermarket sales also declined by more than expected to -2.7%YoY in Feb (from -1.1% in Jan and worse than the forecast decline of -1.8%).

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

Technical: 1-3 Day View – 1.0830 primary upside objective bulls now target the corrective 1.0969 equidistant swing objective. Near term support is sited at 1.08 A close back below 1.07 would concern near term bullish bias.

1-3 Week View – While 1.10 contains corrective attempts higher focus remains on a retest of 1.03 ahead of 1.0118 extension objective form 2015/17 consolidation. Only over 1.14 sets upside focus on 1.1876
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 – 1.2570 upside objective achieved potential for profit taking pullback to test support sited at 1.24 as this area supports expect a test of triangle resistance sited at 1.2640 only below 1.2370 concerns near term bullish bias.

1-3 Week View – While below 1.2864 bears set sites on 1.10 as the broader downside objective, a weekly closing breach of 1.2660 will set up a move to test the weekly bearish line in the sand
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: 1-3 Day View – 111.75 range support breached the daily close below here suggests downside range break and opens 108.43 equidistant swing objective to the downside, near term resistance is sited at 110.75. Only over 112 stems near term selling pressure.

1-3 Week View – as 110 weekly symmetry swing support survives on a weekly closing basis bulls will look for a grind higher to retest 115, a close below 108 which represents an equidistant swing from the cycle, negates the broader bullish theme.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: 1-3 Day View – Anticipated test of 119.30 attracts profit taking as 121 caps upside attempts bears target a test of 118.22 as the next downside objective. Only over 121.80 arrests near term selling pressure.

1-3 Week View – As symmetry swing support sited at 117.69 survives on a closing basis bulls will continue to target weekly symmetry swing resistance sited at 124.42, a weekly close above here would set a broader base for further upside.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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