Then GBPCAD has formed a possible rejection pattern off the Camarilla W H3 pivot. We could see a drop.
Overbought conditions along with the change in momentum have made the pair look more bearish. 1.6900 zone could reject the price down to W L3 pivot. W L3 is 1.6820. Only a close above 1.6940 could make the price go higher towards 1.6921 where the trend line is. At this point sellers are slowly regaining control but it’s the NFP Monday so be careful.
The GBP/CAD is still bearish. The pair has broken yesterday’s lows before spiking higher. The GBP was bought early in the morning session.
We need to have in mind that the deadline for extending the Brexit transition period is on 30 June. This bounce is contributed to a sort of optimism but all GBP crosses have a headline risk now. At this point I still see the CAD stronger than GBP. Yesterday’s lows have been broken and the price is rejecting THU highs. We should expect a bearish continuation towards 1.6880.
The GBP/CAD had formed a potential retracement above W L3 support, which is in confluence with M L5 camarilla support. The price should go up.
At this point we can also see a small inverted head and shoulders pattern which indicates bullish pressure. For a continuation to the upside, the pair needs to close above W H3 camarilla pivot – 1.7075. A close above that level will give additional bullish impulse to the price and we should see 1.7117 and eventually 1.7186.
The GBP/CAD is bearish. However, the GBP has recovered a bit and bears need to keep the price below 1.7105.
If bears manage to keep the price below the ATR projected high, we might see another leg down. The POC zone is 1.7050-60 and rejections off that zone should bring the price down. We can see that the market is still following the zig-zag pattern and we should see a drop. Targets are 1.7020, 1.6990 and 1.6960. Only a move above 1.7105 will be a potential trend change in the pair.
The GBP/CAD has come to the support and the price might be bouncing above the POC zone. The further move up will be stronger above 1.7600.
Chaotic market movements might have been caused by end month flows and fixing. Bounces close to 200 pips within different markets have been spotted. The GBP/CAD has formed a bullish bounce at the POC zone and the price should move up. If we see a new candle close above 1.7600, then the next target is 1.7646, followed by 1.7690 and 1.7716. A move below 1.7530 will invalidate this bullish scenario.
The GBP/CAD is still in uptrend. If the market stays above 1.7200 we can expect uptrend continuation.
A strong 4h close above 1.7200-1.7223 will make a decisive move forward towards higher targets. Until that happens, the trend is still bullish but the price might drop. The best scenario is a close above W H3 pivot – 1.7223 and then we shouldsee a move towards 1.7250 and 1.7323. As long as the price hovers below 1.7200, we might see another drop lower.
1.7230-80 is the POC zone. 4h close above the zone suggests a bullish bounce towards 1.7390 and eventually 1.7455. A close below the zone will be bearish and the price should go to 1.7225, 1.7191 amd 1.7136. The final target is 1.7047. These targets are intra-week targets and we might see some of them hit today.
The analysis has been done with the CAMMACD.MTF template.
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Many green pips, Nenad Kerkez aka Tarantula FX
This week the price is above the 100- and 200-week MAs at 1.71 and 1.7155 respectively. The weekly candlestick hasn’t closed yet, so there are reasons to worry that the breakout to the upside is a false one.
At the same time, there’s still some space on the upside until GBP/CAD hits the next major resistance: there’s a 100-month MA at 1.7285 and the 78.6% Fibo retracement of the May-August decline at 1.7335. These levels may attract the market. As a result, short-term buying with there targets looks possible. It will be necessary to be careful, though, when the price reaches the resistance and consider selling if signals from price action like pin bars arrive at this point.
This post is written and submitted by FBS Markets for informational purposes only. In no way shall it be interpreted or construed to create any warranties of any kind, including an offer to buy or sell any currencies or other instruments.
The views and ideas shared in this article are deemed reliable and based on the most up-to-date and trustworthy sources. However, the company does not take any responsibility for accuracy and completeness of the information, and the views expressed in the article may be subject to change without prior notice.
The story defining the Pound’s steep depreciation in recent days continues to revolve around Brexit-related uncertainty and a broadly stronger US Dollar.
Much attention will be directed towards the Bank of England policy meeting which should offer fresh insight into the health of the UK economy. It’s widely expected that UK interest rates will probably be left unchanged today, attention will be directed towards the language of the policy statement, inflation forecast and whether there is split in the MPC vote.
The Sterling still appears heavily depressed but could be thrown a lifeline, if the BoE hints a rate hike in 2019 on the condition a soft Brexit or no Brexit at all. Alternatively, buying sentiment towards the Pound is seen taking a major hit if the central bank rules out a hike this year due to the endless uncertainty created by Brexit.
What would be seen as a major threat to the Sterling resuming its painful descent would be if the BoE issues a downbeat policy statement, suggesting a downward revision in growth and inflation forecasts which obstruct the need to raise rates.
Away from the BoE meeting, Theresa May will be flying to Brussels today on a mission to secure further concessions from the EU. With the European Union already making it clear that the withdrawal agreement is “not open for re-negotiations”, it will be interesting to see how her trip plays out. The Pound is seen weakening if she returns back to London empty-handed. However, a rebound could in the cards if expectations start to mount over the government extending Article 50.
Taking a look at the technical picture, the GPUSD is bearish on the daily charts. The current support around 1.2900 could transform into a dynamic resistance that encourages a decline towards 1.2840. If 1.2900 is able to prove reliable support, prices are seen trading back towards 1.3000.
In the currency markets, the Dollar has extended gains against a basket of major currencies this morning. With the currency on a six-day rally streak, bulls have clearly won the battle this week. However, the upside is still likely to face headwinds down the road as markets still expect the Fed to take a pause on rate hikes this year. Focusing on the technical picture, the Dollar Index is seen challenging 96.80 in the near term.
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Following its failure to surpass the 1.3370-75 resistance-region, the USDCAD again aims to test the two-month old support-line of 1.3200. Should the pair slips beneath the 1.3200 mark, the 1.3160 and the 1.3125 are likely following numbers to please sellers before flashing 1.3100 on the chart. On the upside, the 1.3280 can limit the pair’s immediate upside prior to highlighting the 1.3370-75 area. In case prices rally beyond 1.3375, the 1.3425 and the 1.3445 seem buffers during its rise to 1.3485-90 horizontal-resistance.
GBPCAD’s another reversal from 1.7475-90 resistance-zone signal brighter chances of its pullback to the 38.2% Fibonacci retracement level of 1.7285, breaking which 1.7170 and the 200-day SMA level of 1.7125 can grab the limelight. Given the pair’s refrain to respect the 1.7125, the 1.7060 and the 1.7000 may flash on the Bears’ radar. If at all the pair registers a daily closing past-1.7490 then its surge to 1.7580 and to the 1.7665-70 can’t be denied. During the pair’s sustained advances above 1.7670, the 1.7760 and the 1.7800 may attract market attention.
Even if short-term ascending trend-channel portrays the CADJPY strength, the pair needs to overcome the 82.90 horizontal-resistance in order to accelerate its up moves to the 83.40 resistance, including channel’s upper-line. However, the 83.70-80 region and the 84.25 could confine the pair’s north-run past-83.40. Meanwhile, the 82.20 and the channel-support of 82.00 might limit the pair’s adjacent declines, breaking which 81.30 and the 81.00 could come forward as supports. Should the pair continue trading southwards under 81.00, it can target the 80.60 and the 80.00 rest-points.
Observing a month-long ascending trend-line, the CADCHF now runs towards 200-day SMA level of 0.7550 ahead of looking at the 0.7580 and a bit broader resistance-line of 0.7600. Assuming the pair’s successful break of 0.7600, the 0.7680 and the 0.7720 may become Bulls’ favorites. Alternatively, a daily closing beneath the 0.7470 support-line highlights the importance of 50-day SMA level of 0.7420 and the 0.7370 levels. Additionally, the 0.7335 and the 0.7300 may appear as quote if the 0.7370 fall short of restricting the pair’s downside.
Following its gradual recoveries since week-start, the GBPUSD again confronts four-month old resistance-line, around 1.2980, which if broken on a daily closing basis can propel the pair towards another important resistance, namely the joint of 200-day SMA and downward slanting trend-line stretched since June 2018, around 1.3080-90. Given the pair manage to print a D1 close beyond 1.3090, also clears 1.3100 mark, it may aim for 1.3180 & 1.3260 numbers to north. If at all the pair again fails to surpass the trend-line barrier, the 1.2910, the 1.2820 and the 50-day SMA level of 1.2755 could regain market attention before highlighting the 1.2700 mark including immediate support-line. Let’s say sellers fetch the quote under 1.2700 then the 1.2615 & 1.2570 might flash on their radars to target.
GBPJPY also ticked beyond 50-day SMA level of 142.20 but has to provide a daily closing bigger than that to please buyers with 144.00 and the 100-day SMA level of 144.50. However, 200-day SMA level of 145.55 may confine the pair’s rise after 144.50, if not then 146.00 & 146.80 may become optimists favorites. Meanwhile, the 140.90-80 and the 139.90-70 seem adjacent support to watch during the pair’s U-turn ahead of giving importance to 139.00 rest-point. Should prices keep trading southwards below 139.00, the 137.30 & the 135.75 might offer intermediate halts to its drop in direction to 132.35.
In spite of crossing the 1.7310-20 horizontal-region, the GBPCAD could find it hard to extend latest up-moves as an upward slanting trend-line, at 1.7365, adjacent to the 1.7400, might challenge the Bulls. In case the pair refrains to respect the 1.7400 resistance, the 1.7465 and the 1.7500 are likely following levels to appear on the chart. Alternatively, the 1.7250 may act as nearby support for the pair, breaking which lower-line of “Rising Wedge” formation, around 1.7155, can grab the limelight. If the pair slips below 1.7155, it confirms the short-term bearish pattern and could open the gate for a plunge towards 1.7050 & 1.7000 psychological magnet.
With the clear break of ten-month old descending trend-line and 200-day SMA, the GBPCHF may rally to 1.3030 and then to 1.3110 but the 1.3170 and the 1.3265-75 area could play their role of resistances afterwards. Given the pair’s rise above 1.3275, the 1.3390 and the 1.3450 can be aimed if holding long positions. On the contrary, a D1 close beneath 1.2920 may reprint 1.2875 and the 1.2830 as quotes while 1.2770 could entertain the pessimists then after. During the pair’s decline past-1.2770, the 100-day SMA level of 1.2750 and the 1.2660, including 50-day SMA, might offer rest to the downturn.
With more than a quarter old support-line pulling the GBPUSD up, 50-day SMA level of 1.2775 is likely to play its role of resistance soon, if not then 1.2900 mark, comprising 100-day SMA, followed by 1.3000 round-figure, may gain buyers’ attention. Should prices rise beyond 1.3000 on a daily closing basis, eight-month long downward slanting TL, at 1.3055, and the 200-day SMA level of 1.3165 seem crucial to watch. Alternatively, the 1.2600, the 1.2570 and the 1.2500 could try limiting the pair’s declines before highlighting the 1.2425 TL support for one more time. In case the quote registers a D1 close under 1.2425, the 61.8% FE level of 1.2380 and the 1.2300 might entertain sellers prior to pleasing them with the 1.2200 & the 1.2120, including 100% FE, numbers to south.
Another failure to sustain an uptick past-0.9060-70 resistance-region presently drags the EURGBP towards ascending trend-line, at 0.8935, which if broken can fetch the pair to 0.8880-75 and 0.8810-0.8800 rest-points. Given the Bears’ refrain to respect the 0.8800 mark, the 0.8770, the 0.8740 and the 0.8690 may flash on their radars. Meanwhile, 0.9030 can serve as immediate resistance for the pair ahead of pushing Bulls to 0.9060-70 area. Though, successful clearance of 0.9070 enables the pair to target the 0.9105 and the 61.8% FE level of 0.9160.
GBPCAD is yet to justify its strength by conquering the 1.7130-40 resistance-zone, until that the pair might be considered weak enough to re-test the 1.6950-45 horizontal-support. If at all 1.6945 fall short of restricting the pair’s dip, the 1.6880, the 1.6775 and the 1.6700 could act as consecutive supports. On the contrary, pair’s ability to cross the 1.7140 barrier can escalate the recovery to 1.7200 and the 1.7270 but the 1.7315-20 may confine its further advances. Assuming the quote’s capacity to surpass 1.7320, the 1.7350, the 1.7400 and the 1.7465 might provide buffers during its rally to 1.7500 landmark.
GBP/USD opened the new trading week with a bearish gap near 1.2700 handle before seeing a mild recovery through the mid-Asian trading window erasing losses from the gap down opening. The price action of British Pound seems to be pinned at 1.2750 level as UK markets remain cautious in the run-up to the House of Commons vote on Prime Minister Theresa May’s latest Withdrawal Proposal, which is expected to face defeat at the hands of parliament.
The vote on EU approved Brexit deal is to be by British Parliament tomorrow and the current scenario indicates that deal is likely to be voted down as Labor, the Liberal Democrats, the DUP, the SNP and dozens of Conservative MP’s remain solid on their stance against the deal which could lead to a general election leaving the UK in a messy no-deal Brexit scenario.
GBP Could Slide Sharply On Increasing Brexit Woes
Meanwhile, news from UK Times newspaper that 48 letters required to trigger a no-confidence vote on PM May’s government have finally been sent, also increased market fears and weighed on British Pound. However broad-based US Greenback’s weakness helped the pair limit downside move despite bearish influence surrounding GBP. As of writing this article, GBPUSD pair is trading near flat at 1.2748 up by 0.35% on the day.
On the release front, UK’s calendar is highly active for the day as London market hours will see the release of Q3 GDP, Industrial Production, Manufacturing Production and trade balance data with forecasts hinting at positive GDP data and dovish outcome for industrial and manufacturing production data. Bearish data will influence cable into a highly volatile price action as investors remain twitchy ahead of tomorrow’s Brexit vote.
Meanwhile, US market hours remain relatively silent aside from JOLTs Job Opening data. When looking from a technical perspective, the overall outlook for British Pound continues to remain firmly bearish. The daily chart shows that it broke the daily descendant trend line coming from November high through lateralization, invalidating the relevance of the break.
In the same chart, a bearish 20 SMA has rejected advances while technical indicators resumed their declines within negative ground, keeping the risk skewed to the downside. According to the 4 hours chart, the pair offers a neutral-to-bearish stance, as it closed a few pips below a flat 20 SMA, as technical indicators maintain downward slopes below their midlines. Expected support and resistance for the pair are at 1.2695, 1.2660, 1.2620 and 1.2775, 1.2805, 1.2840 respectively.
With the UK’s exit from Europe on 29 March 2019 just over 4 months away, uncertainty continues to grow. Just when it appeared that Prime Minister Theresa May had a deal and her cabinet’s approval, ministers began to resign.
It appears the Prime Minister does not have the backing of Parliament and there are mounting calls for her resignation.
Sterling is reacting sharply to developments and after strengthening marginally on news of the cabinet approval, sold off sharply when ministers began to exit.
Bank Assets on the Move
One of the very real implications of Brexit has become clear as a growing list of investment banks have announced plans to move as much as $280 billion in assets from London to Frankfurt. So far Goldman Sachs, JPMorgan, Morgan Stanley, and Citigroup are finalizing Brexit plans according to a Bloomberg article published last week.
Deutsche Bank announced in September that it planned to move assets to Frankfurt, with the Financial Times suggesting that it may move several hundred billion USD worths of assets from its London balance sheet to Germany.
The implications of moving all these assets away from London have yet to be fully digested by the market. The mechanisms involved in moving assets from one entity to another depending on the type of assets and whether they are balance sheet assets or owned by a bank’s clients. In some cases, complex derivatives may be required to transfer risk from one legal owner to another.
Regulators will have to approve some plans, which will have an impact on timing. But, these plans can only be finalized when the details of the UK’s deal with Europe is known, and the current deal seems to be anything but final.
What Are the Consequences?
In the short-term uncertainty is likely to mount over the next few months as banks grapple with logistical and legal issues. In the longer term, the only certainty is that London will have a smaller financial services industry, while Frankfurt and Dublin will see their financial services industries growing.
The currency pairs that are relevant are obviously the EUR/GBP and GBP/USD.
There is little reason to expect strength from the Pound until there is a lot more certainty. The EUR/GBP pair has traded in a fairly tight range over the last 12 months but remains close to 2017 lows. The GBPUSD may well be targeting 2017’s lows as both Brexit and weak equity markets reinforce the USD’s safe haven status.
Eventually, the Pound will probably offer a great buying opportunity, but over the next few months, any good news is very likely to follow by the more bad news. Selling Sterling rallies may be a lucrative strategy.
As far as currencies go, with the risk of falling liquidity and rising uncertainty the only winner may well be the USD.
UK assets are trading at a discount to other markets, but then there a good reason for that. It’s worth remembering that most of the companies in the FTSE 100 are global businesses that earn profits around the world. If the Pound weakens earnings from international operations go up.
Both indices will, of course, be affected by global equity markets which are currently under pressure. If calm returns to global markets the FTSE 100 may offer an opportunity which would be further supported if the GBP weakens. Meanwhile, the FTSE 250 will offer an opportunity if a sense of certainty arrives.
Asian market was mostly higher despite a bombshell allegation against Nissan Chairperson Carlos Ghosn. Ghosn has been accused of violating major Japanese financial laws that may have a material impact on his ability to lead Nissan. The Nissan board issued a statement that Ghosn and another board member had been under-reporting compensation for many years. The news, released after the close of the Asian session, sent shares of Nissan down more than 12%. In political news, US President Donald Trump may be ready to make a deal with China although results of the APEC meeting are not promising. Jonathan Fenby of TS Lombard said in an interview that Trump is showing signs of a readiness to deal. His hesitancy to lift tariffs to 25% shows caution that may result in positive developments at the G-20 meeting next month. Meanwhile, at the APEC meeting, US and Chinese differences prevented the group from forming an accord for the first time ever.
Brexit Hopes Lift UK, Nissan Drags On Market
EU indices were flat to up at midday as Brexit hopes to provide support and the Nissan news weighs on the indices. On the Brexit front UK Prime Minister, Theresa May is doing her best to ram through whatever kind of deal she can. She says a change of government would only prolong the affair while those within her own government are leaving their posts or criticizing the deal as bad for the UK people. The UK FTSE 100 led advancing indices at mid-day with a gain new 0.65%. The German DAX and French CAC were both holding flat with gains near 0.0%. The pound was able to gain versus the dollar but the move was small in early Monday trading, only about 0.25% Regardless, the move extends a bounce from the support that began in the previous week and indicates the 1.2700-1.3200 trading range may dominate the GBP/USD in the near-term.
US Market Flat Despite Trade Optimism
The US equity market was indicated to open with a small loss in early Monday pre-opening trading. The SPX was indicated lower by 0.25% while the tech-heavy NASDAQ Composite led with a decline near 0.45%. Shares of Apple are primarily to blame, a report orders of iPhones had been cut led shares of that stock down by 1.0%. The tech-sector was further weighed down by reports South Korean authorities had massive amounts of evidence three manufacturers including Samsung and Micron were committing antitrust violations. On the earnings front, Agilent and Intuit are expected to report after the bell. A miss from either of those companies could spark further bloodshed in the tech sector. There was no economic data today but there are some important reads on housing and leading indicators due out later this week. The market will be closed on Thursday, November 22nd, for the Thanksgiving Holiday. Expect to see light trading volume in the US all week.
Asia, led by China, moved broadly higher in Thursday trading, extending a bounce that began earlier in the wee. The Hong Kong-based Heng Seng led advancing indices with a gain of 1.75% followed by a 1.36% gain for the Shang Hai Composite. The Korean Kospi advanced nearly 1.0% on word a draft-Brexit had been written while the Australian ASX and Japanese Nikkei closed closer to break-even. The Japanese Nikkei was Thursday’s laggard posting a loss near -0.20%.
China’s equity markets were also supported by word the Chinese government had sent a written response to Washington’s demands. The details of the letter are not yet known but the sentiment is positive in light of the recently reduced tension between the US and China. Chinese President Xi Jinping and US President Donald Trump are slated to meet at the G-20 Summit in order to discuss improving trade relations.
EU, UK Down On Brexit Resignations
The UK and EU markets were initially higher on easing fear a hard-Brexit was inevitable. Those fears came back to the forefront soon after the open and reduced gains to near 0.25% for the FTSE 100 and Xetra DAX by midmorning. The CAC was the laggard posting mid-morning a loss of -0.20%.
In the UK, tensions over the draft-Brexit have split Theresa May’s parliament resulting in the resignations of several key members including the Brexit Secretary Dominic Raab. Raab says he can not support the current Brexit plan in light of promises made to the British people by ruling party members before the referendum was taken. The Brexit news had a negative impact on the pound. The GBP/USD and EUR/GBP both shed nearly -1.50% on the news.
US Markets Brace For Data, Dollar Moves Higher
The US futures market was indicating a positive open for equity indices in the early hours of the morning. Traders wary of geopolitical events were focused on a raft of economic data that produced a mixed bag of results. After the 8:30 AM data deluge futures pared their gains to indicate an open near break-even.
Retail sales figures came in hotter than expected at 0.80%. This is 0.3% hotter than expected and points to continued strength in the consumer. On the manufacturing front, the Philly Fed’s MBOS fell nearly 10 points to 12.9, far below expectations, on weakness in New Orders. The Empire State Manufacturing Survey counterbalanced MBOS by advancing 2.0 points to 23.3 in evidence of expanding activity in the New York Federal Reserve District.
Earnings reported released before the open on Thursday were good but did not spark a rally in equities. Both WalMart and Cisco reported top and bottom line results that beat the analyst’s consensus and provided a positive outlook. Walmart rallied a little more than 1.0% on the news while Cisco advanced a more robust 4.0%. NVIDIA tops the list of companies reporting earnings after the bell on Thursday. The company is expected to post YOY gains but the result may be negatively impacted by weak sales of cryptocurrency mining chips.
Asian markets were down nearly across the board as the price for WTI and Brent crude fell to a one-year low. Both global oil benchmarks fell more than -7.0% in Tuesday trading as supply-glut, and downward pressure in prices bent the market to capitulation. The commodity-sensitive Australian ASX led the decline in equities with a loss of -1.75%. Chinese markets moved lower by a tame -0.85% in Shang Hai and -0.54% in Hong Kong.
Chinese markets were buoyed by a mixed bag of economic data. Retail Sales growth in October was a robust 8.6% YOY but missed expectations and raised concern the effects of trade tensions were being felt at the consumer level. Balancing the data was better than expected Industrial Output, 5.9%, and Fixed Investment Spending, 5.7%.
EU Markets Wary Of Brexit Deal
EU markets were moving lower in early trading, but buyers stepped in on word a Brexit deal had been reached. The news is this, negotiators have reached a draft deal that will now be taken for approval by Theresa May’s cabinet. The question now is whether May can get approval from hardliners who’ve been impeding progress.
At midday, EU equities markets were little changed. The FTSE led advancing indices with a gain near 0.25% while the CAC led decliners with a loss less than -0.10%. Market participants, wary of Brexit progress, were also eyeing developments with Italy and its budget. The Italian government has rejected the EU’s request for a new budget proposal and reaffirmed their 2.4% growth target.
US Consumer Level Inflation Hot, But Not Too Hot
The US index futures were slightly lower in early trading but spiked on word consumer-level inflation is contained. The US CPI was reported as up 0.3% from the previous month and up 2.5% YOY. The data shows an acceleration of inflation growth in both the MOM and YOY comparison but only as expected and mitigated by high gas prices. Ex-food & energy CPI rose a more tepid 0.2% MOM and 2.1% YOY, a -0.10% deceleration in YOY inflation from the previous month.
Despite the rise of index prices following the CPI release US equities were not expected to open much higher than Tuesday’s low. The Dow Jones Industrial Average led with an indicated gain near 0.25% while the SPX was not far behind.
Reports trade talks between the US and China had been restarted failed to lift the market, as did earnings. Macy’s, one of the higher profile brick & mortar retailers, reported before the opening bell and blew past EPS estimates. The company reports EPS of $0.27, nearly double consensus, increased comp store sales, and widening margins and yet the stock fell nearly -4.0% in the early pre-market action.
US traders will now turn their attention to earnings reports due out after the bell and a raft of economic reports due out on Thursday. Earnings reports include names like Cisco and Wheaton Precious Metals while Thursday data includes the jobless claims, retail sales, the Philly Fed MBOS, and the Empire State Manufacturing Survey.
Brexit continues to cause jitters and concerns in the markets. However, some investors have sensed a window of opportunity that they are slowly taking advantage of. Steve Eisman believes that now is the right time to short two U.K banks as expectations of the U.K leaving Europe without a deal soars.
Eisman Short Stance
According to the Neuberger Berman Group money manager, the U.K is one of the biggest risks. While the high profile short seller expects the U.K government to agree to an exit deal, he remains pessimistic of parliament approving the deal. Eisman has also warned that he could short other stocks should Jeremy Corbyn become the next prime minister.
“I’m shorting two stocks in the U.K., but I’ve got a screen of about 50, and I might short all 50 if I think Jeremy Corbyn is going to be prime minister. Corbyn’s a Trotskyite. Now I know my Trotskyites well, and I know you don’t want to be invested in the U.K. if a Trotskyite is a prime minister,” Eisman said.
Eisman made a name for himself on predicting the collapse of the subprime mortgages as the financial crisis was just but starting. He now believes that the two unnamed banks would pay a hefty price on the U.K exiting the trading block.
While he is yet to give clues of the banks he is shorting, it is becoming increasingly clear that Metro Bank Plc. and CYBG Plc. could be the two unnamed banks. The two banks have continued to attract immense short selling pressure. The total number of shares shorted at Metro currently stands at 7.9% nearly double the ratio at CYBG.
Early in the year, Eisman did recommend shorting Deutsche Bank AG Shares over concerns about profitability issues at the German lender. The short seller has also raised concerns about the bank’s capital levels which he believes are quite low and may force the bank to raise some money next year. Canadian financial companies, as well as Wells Fargo, have also attracted short selling recommendation from the high profile investor.
Five months to the deadline, Britain is yet to reach a deal with the European Union on how to go about Brexit. Negotiators are in heated discussions as both refuse to budge from their tough stance. Uncertainty as to whether or when Britain will reach an agreement appears to be fuelling concerns especially in the market.
The pound has come under immense pressure in recent weeks and continue to lose ground against the majors. More than 70 business leaders under the Lastminute.com umbrella have already signed a letter arguing potential ramifications on companies, on the U.K failing to reach an agreement.
Separately Eisman has reiterated he remains short on Tesla stock, despite a recent price surge. Tesla stock has experienced wild price swings in recent weeks in the wake of CEO, Elon Musk failing on his bid to take the company private. The stock did plunge below the $280 a share level. However, it has since bounced back on exceeding expectations with a stellar third quarter financial report.
In the middle of August, the British pound got a boost to turn the downtrend. And it seemed that despite uncertainties around the Brexit deal, negative forecasts for the UK economic growth, the GBP found a strength to rise. However, up to now, risks that the downtrend has resumed have been increasing.
Why the GBP is under pressure?
In the middle of September, the appreciation of the British currency stuck. It’s clear that the Brexit deal is the main driver of the British currency and recent negative events related to the Brexit pulled the GBP down. What is more, the end of the Brexit isn’t close. As a result, traders are curious whether the GBP will be able to recover or not.
On Monday, October 29, UK finance minister Mr. Hammond delivered the budget. Although comments were optimistic: the minister announced an end of the austerity, predicted the economic growth and real wage growth, which is highly positive for the GBP in the long-term, the GBP wasn’t encouraged.
It means that the market keeps worrying about the impact of the Brexit deal. Until it sees confirmations of the soon disposition of the issue, neither strong economic data nor positive comments on the economy will boost the GBP.
But does it mean that the British currency won’t get a chance to recover at least in the near term?
What to expect in the upcoming days?
Let’s start with the GBP/USD pair.
The plunge of the GBP was caused also by the strengthening of the USD. The US dollar index has reached the August highs.
Traders are waiting for the Super Thursday. The Bank of England will release the interest rate. Of course, the market doesn’t anticipate any changes to the rate, however, it will try to catch the mood of the central bank. If the BOE is optimistic, the GBP will be supported.
However, on Friday the US will release the jobs data. NFP will make the USD highly volatile, but at the same time, it may help the index to gain a foothold on August maximums.
What levels should we expect?
On the daily chart, the price formed a double top pattern. The neckline at 1.2920 was broken on October 24 and as a result, the pair kept falling. However, on October 30 the pair reached the target at 1.27 and rebounded.
Up to now, we have a question: for how long the pair may rise?
Technical indicators don’t give strong signals. RSI is near to cross the 30 level bottom up, it reflects the upward movement of the pair. But the further rise may be limited.
An increase of the GBP will depend on the mood of the central bank. Hawkish Mr. Carney will push the currency up. The resistance will lie at 1.2895 and only the weakness of the USD will pull the pair to 1.3016.
At the same time, we should remember another scenario. The pessimistic BOE and the strong US jobs data may pull the pair back to 1.27. Moreover, negative comments on the Brexit deal will affect the currency as well. A break of 1.27 will provoke a fall to April lows at 1.2584.
Nov 1: BOE Meeting, Manufacturing PMI
Nov 2: Construction PMI
Nov 1: ISM Manufacturing PMI
Nov 2: NFP
Does the GBP have more chances against the EUR?
The euro has been suffering as well. The most recent event that pulled the euro down was comments of Angela Merkel about her stepping down as a chancellor in 2021. Italy’s budget issue is still a threat to the euro’s rate. However, looking at the chart of EUR/GBP, we see that the British pound is weaker than the EUR.
Events to look at:
On October 31, the pair managed to rebound from the resistance at 0.8791. The RSI indicator is near to cross the 70 level upside down that signals about the downward movement of the pair.
The further direction of EUR/GBP will depend on the BOE statement and the ability of the euro to recover. In the case of the pessimistic mood of the BOE and negative economic figures, the pair will be able to break above 0.8921. The next resistance is at 0.8958.
However, if the euro doesn’t gain momentum and traders consider the BOE statement as positive, the pair may go to the support at 0.8860.
Nov 1: BOE Meeting, Manufacturing PMI
Nov 2: Construction PMI
Comments on Italy’s budget
Making a conclusion, we can say that the GBP has a chance to rise. However, in the upcoming day, comments on the Brexit deal, the mood of the BOE, strength of the USD and European news will affect the moves of the GBP/USD and EUR/GBP pairs. Follow the economic calendar and the news to be sure in the further direction of the GBP.
Traders like central bank meetings as they drive markets a lot. It doesn’t matter whether it is a rate hike or just clues on the economic conditions, the currency suffers a high volatility. The Bank of Canada will release the interest rate on October 24. The market is looking for the rate hike. As a result, the Canadian dollar is anticipated to appreciate against other currencies. Let’s consider currency pairs that will be affected by the decision of the BOC the most.
It is logical to start with the USD/CAD pair. Last week, the Canadian dollar suffered because of the negative figures of two the most important indicators such as CPI (consumer price index) that reflects the inflation level and core retail sales data. However, the rate hike may support the CAD.
How to trade the pair?
On Tuesday, USD/CAD keeps rising. But ahead of the rate hike, the CAD will be able to recover and the pair may break the support at 1.3050 (100-day MA). The next the support is at 1.3014.
One small tip: as traders are sure that the BOC will increase the interest rate, this decision will be priced in. So be ready, that after the release, the CAD will weaken. Don’t try to catch a signal to sell after the BOC decision.
But what if the BOC doesn’t raise the interest rate?
This scenario is unlikely, however, traders should be ready for any possibilities. In this case, the CAD won’t avoid a great plunge. As a result, the pair will rise significantly. The USD/CAD pair will appear above the trendline at 1.3117. The next resistance will be at 1.3185.
The British pound is under big pressure as the Brexit deal is far from its logical end. At the beginning of the week, the British currency plunged because of the risks that Theresa May could face a vote of no confidence. Up to now, the GBP has been recovering, pushing the GBP/CAD pair up.
On Wednesday, we can anticipate a fall of the pair as the traders will buy the Canadian dollar. Important support levels will lie at 1.6929 and 1.6863. After the release of the rate, we can anticipate that the pair will keep trading within the horizontal channel of 1.6988-1.7088, as MAs are moving in the horizontal channel and the RSI indicator is between 30 and 70 levels.
What if there is no hike?
A cancellation of the rate hike will boost the pair up. As a result, GBP/CAD will be able to break the resistance at 1.7088 (pivot point and 100-day MA) and move further up to 1.7213.
The EUR is still under threat because of Italy’s budget issue. The level of debt overcomes the European Union limit more than twice. Italy has already denied compromising on its economic targets. However, the EU won’t be happy with this budget prospects as well. As a result, risks of the prolonged discussions are increasing.
EUR/CAD has been trying to recover. However, the rate hike will pull the pair down. The first support is at 1.4961. After the interest rate is released, the pair may recover. The market is waiting for the comments from the ECB on Thursday. If traders are satisfied with the mood of the central bank, the euro will recover. The pair will continue trading within the channel of 1.4961-1.5125.
What if the BOC changes its decision?
The pair will move directly to the resistance at 1.5125.
Making a conclusion, we can say that if the BOC satisfies the market expectations, the CAD will rise and as a result, all three pairs will move in the favor of the Canadian dollar. If the BOC surprises with the cancellation of the rate hike (that is unlikely), the CAD will plunge.