GBP/USD, USD/CAD, USD/MXN – North American Session Daily Forecast

GBP/USD continues to post strong gains. In Wednesday’s North American session. Currently, the pair is trading at 1.2830, up 0.55% on the day.

Cable Surges on Brexit Optimism

The British pound surged on Tuesday, climbing an impressive 1.2%. The pound has enjoyed an excellent October, gaining 4.0%. The catalyst for this run has been the Brexit withdrawal date of October 31 and whether a deal can be made in time. The pound has soared as the markets are clearly of the opinion that an agreement can be reached and a nightmarish no-deal scenario avoided.

Technical Analysis

GBP/USD easily broke through 1.2653 on Tuesday and proceeded to test resistance at 1.2750. The trend for the pound to dollar ratio is up, and if the pair continues to move higher, it could soon set its sights on resistance at 1.2870. On the downside, there is support at 1.2585.

GBP/USD 4-Hour Chart

USD/CAD

USD/CAD is trading sideways in Wednesday’s North American session. Currently, the pair is trading at 1.3214, up 0.07%.

Canadian CPI Beats Forecast

Canadian CPI moved closer to the Bank of Canada target of 2.0%. On an annualized basis, CPI showed a 1.9% gain, above the forecast of 1.7%. Trimmed CPI, which excludes the most volatile items which are covered in CPI, remained steady at 2.1%, on an annualized basis.

Technical Analysis

1.3240 remains an immediate resistance line and has been under pressure during the week. On the downside, the pair has tested support at 1.3200, but has not been able to push sustain downward movement below this level. I do not expect any significant movement for the remainder of the Wednesday session.

USD/CAD 4-Hour Chart

USD/MXN

USD/MXN has recorded slight gains on Wednesday. In the North American session, the pair is trading at 19.26, up 0.11% on the day.

Technical Analysis

USD/MXN broke through support at 19.30 early in the week and is putting pressure on 19.20, which is a major support level. This line, which has remained intact since early August, could be tested during the week. On the upside, there is resistance at 19.45.

What is The Target of The Pound?

In less than a week, the British pound strengthened by 5% to the dollar and 4.3% against the euro to its highest levels in five months. The UK’s FTSE100 added 0.7% during the same period, and this week it is declining due to the strengthening of the national currency, although it rose in dollar terms by more than 4%. This performance better than the S&P500 growth by 3.5% over the same time.

Since last Thursday’s rally, GBPUSD has come a long way from near 1.22 and touched 1.28 last night. At the time of writing, the pound corrected to 1.2750, although the pair remains above the critical 200-day moving average line at 1.2710. It often acts as an essential trend indicator. Fixing the pound above this line at the end of this week will be a necessary signal for the markets to end the devaluation period.

The British pound sold out in July, declining below 1.20 in August and September, reflecting the maximum fear around chaotic exit of Britain from the EU. The appearance of significant signs of progress in the Irish border negotiations was a critical factor in the trend reversal.

If the EU and Britain agree deal on an exit on October 31 during Thursday and Friday summit, and the UK Parliament accepts it at the Saturday session, GBPUSD may quite quickly return to this year highs around 1.32.

The strengthening of the pound above its 200-day average in 2017 triggered a prolonged rally by 13% to 1.43. Fundamentally, the British currency in the coming months may get lift by both higher inflation rates and stronger economic indicators, which may be positively affected by the weakening of the British pound earlier. Without the uncertainty around Brexit, the Bank of England may well be more determined in its fight against inflation. Thus, the lows around 1.20 may well be a bottom for GBPUSD for the foreseeable future.

The EURGBP reached its peak near 0.93 in August, after which it turned sharply down, and now is trading by 7% below its peak levels at 0.8650. As the British and EU deal may have a positive impact not only on the pound but also on the euro, the potential for the weakening of EURGBP is noticeably lower – from 0.85 to 0.8350. Around 0.85, the pair consolidated from March to May, and on the way to 0.8350, it redeemed on the downturns in the period from August 2016 to May 2017, which makes these areas significant attraction points for the markets.

This article was written by FxPro

GBP/USD Daily Forecast – Sterling Holds Near Highs Awaiting Further Brexit News

Brexit Talks Resume in Brussels

EU’s chief negotiator Michael Barnier wanted a legal text of a potential deal delivered by Tuesday but after negotiating until 1:30 AM yesterday, an agreement could not be made. Talks resume today, taking it right down to the wire as negotiations are not meant to take place during the EU summit which starts tomorrow.

I suspect GBP/USD will extend gains if we get word later in the day that a legal text was finalized. However, UK Prime Minister Johnson still has his work cut out for him.

If he’s able to come to an agreement with EU negotiators today, the deal will still need to be approved by the member states at the EU summit which takes place on Thursday and Friday.

But more importantly, the UK parliament needs to vote on the deal. Since Johnson has lost his majority, it’s unclear if all his efforts will be fruitful since parliament could turn it down.

If a deal is not reached, Johnson will be required to request an extension under the recently passed Benn act. This could get tricky as the British PM has said several times that the UK will leave on October 31 no matter what. But when pressed for an answer, he has also said that he will abide by the law.

Technical Analysis

GBP/USD is up about 4% since Johnson announced last week that he found a pathway to a potential deal. Although technical indicators are in oversold territory at this point, I think the exchange rate can continue to move higher if there is further positive news.

GBPUSD 4-Hour Chart

The next level I have my eye on is 1.2924. This level was respected on a weekly chart after the referendum that took place over three years ago.

Price action is likely to be volatile and therefore I’m looking at support at 1.2575. Normally, that level would fall well out of the daily range for the pair. However, considering what is at stake, I’m not ruling out a dip towards it.

Bottom Line

  • An announcement might come that a deal has been agreed on with negotiators later today.
  • The legal text of these negotiations would then be put forth to a vote at the EU summit.
  • If approved at the EU summit, it will go to the UK parliament. In a rare move, parliament will convene on Saturday to decide on the next step.

Asian Stocks Climb as US Banks’ Earnings Boost Equities

Gains in riskier assets are coming at the expense of safe havens, with Gold now trading below $1485, 10-year US Treasury yields surging past 1.77 percent before easing, while USDJPY touched the 108.86, its strongest level since the start of August.

Even with the gains in equities, some measure of caution is still warranted, as investors cannot rule out a sudden spike in US-China trade tensions or Brexit risks. While riskier assets are enjoying their time in the sun, they could see a rapid unwinding if any of these risks return to the fore.

Brexit deal optimism keeps Pound elevated

The Pound grazed the 1.28 mark against the US Dollar for the first time since May before moderating, as investors hold out hope that a Brexit deal can be secured with the EU in a matter of days. Sterling has strengthened against all G10 and Asian currencies so far this week.

Should the Brexit deal be approved at the upcoming EU leaders’ summit, that could prompt GBPUSD to claim more upside towards 1.30. The Brexit deal however, is expected to face a sterner political test in Westminster, where previous versions of a deal have failed. Should this Brexit deal fall short in overcoming any of its political hurdles this week, Sterling could then quickly tumble towards 1.22.

UK Prime Minister Boris Johnson may then be forced to ask for a Brexit extension, and in so doing, merely kick the Brexit can down the road once more and string the Pound along its volatile path for longer.

US retail sales data could shift Dollar, Fed rate cut expectations

With the Dollar Index (DXY) now trading around the lower 98 levels, DXY’s next move could be triggered by the upcoming September US retail sales data. Investors have been relying on US consumers to keep the momentum in growth intact, seeing as the US manufacturing sector has been feeling the strains from global trade tensions.

Should the retail sales print come in below market forecasts of 0.3 percent, that could prompt some softness in the Greenback as markets ramp up expectations for more Fed policy easing in 2019. At the time of writing, the Fed funds futures point to a 72.9 percent chance of a 25-basis point cut at the end of this month, followed by a 55.4 percent chance of the Fed leaving its benchmark interest rates unchanged in December.

The Dollar could moderate further if the risk-on mode is sustained following a “limited” US-China trade deal. US President Donald Trump may be forced to dilute his hardline stance in order to seal more policy wins in the lead up to the 2020 Presidential elections. Such a scenario could erode support for the Greenback, as global economic conditions and risk appetite draw relief from easing trade tensions.

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Brexit and Economic Data Put the GBP and USD in Focus

Earlier in the Day:

It was a relatively busy day on the economic calendar through the Asian session this morning.

New Zealand 3rd quarter inflation figures provided the Kiwi Dollar with direction early in the session.

Outside of the stats, positive updates on Brexit and U.S corporate earnings failed to support risk sentiment early on.

For the Kiwi Dollar

The annual rate of inflation eased from 1.7% to 1.5% in the 3rd quarter, while coming in ahead of a forecast of 1.4%. Quarter-on-quarter, consumer prices rose by 0.7%, following a 0.6% rise in the 2nd quarter. Economists had forecast a 0.6% increase.

According to NZ Stats,

  • Higher prices for rents and cigarettes and tobacco supported the 1.5% increase in the CPI, year-on-year.
  • The increase was partially offset by falling prices for vegetables, petrol, and telecommunications equipment.
  • Quarter-on-quarter, the 0.7% rise in consumer prices came off the back of price rises for local authority rates and payments, vegetables, and meat and poultry.
  • Falling prices for fruit, petrol, and new cars were negatives for the quarter.

The Kiwi Dollar moved from $0.62858 to $0.063125 upon release of the figures. At the time of writing, the Kiwi Dollar was down by 0.21% to $0.6281.

Elsewhere

At the time of writing, The Japanese Yen was up by 0.14% to ¥108.71 against the U.S Dollar, while the Aussie Dollar was down by 0.21% to $0.6739.

The Day Ahead:

For the EUR

It’s a relatively busy day ahead on the economic calendar. Finalized Italian and Eurozone inflation figures for September are due out later this morning, along with the Eurozone’s August trade figures.

Barring material deviation from prelims, the Eurozone’s trade data will likely have the greatest influence on the EUR.

Outside of the numbers, Brexit will continue to have an impact throughout the day.

At the time of writing, the EUR was down by 0.02% to $1.1031.

For the Pound

It’s a relatively busy day ahead on the data front. September inflation figures are due out later this morning.

We can expect the Pound to show greatest sensitivity to the annual rate of inflation and the Input Producer Price Index figures.

Direction for the Pound will ultimately come from Brexit updates, however. With the EU Summit now just 4-days away, time is rapidly running out.

Positive updates from the EU and the Brexiteers delivered more upside for the Pound at the start of the week. Expect plenty of volatility and a reversal should negative updates begin to filter through, however.

At the time of writing, the Pound was down by 0.28% to $1.2751.

Across the Pond

It’s a relatively busy day ahead on the economic calendar. September retail sales figures are due out later today, along with August business inventory numbers.

Retail sales will have the greatest influence on the day. Consumer spending remains a key contributor and barometer to the U.S economy. Any unexpected slide in spending and expect the markets to balk as recession chatter continues to do the rounds.

On the geopolitical front, demand for the Dollar could rise should progress on Brexit negotiations hit a wall. Chatter from the Oval Office also needs monitoring throughout the day.

The Dollar Spot Index was up by 0.02% to 98.312 at the time of writing.

For the Loonie

It’s a busier day on the economic calendar, with September inflation figures due out later today. Expect the Loonie to react to today’s figures, with support likely to kick in should inflationary pressures build. The monthly movement in consumer prices will likely have the greatest impact.

With the BoC holding steady on the monetary policy front, inflation will need to hold steady at best.

The Loonie was down by 0.04% at C$1.3204, against the U.S Dollar, at the time of writing.

GBP/USD Price Forecast – British Pound Continues To Bounce Around

The British pound has shown a significant amount of volatility over the last week or so, and the last couple of sessions have been completely counter to each other. This typically means that the market is trying to catch its breath and will probably consolidate overall. At this point, the market is likely to find a lot of back-and-forth, and it will of course continue to be very concerned about the Brexit. Obviously, the headlines will come fast and furiously over the next couple of weeks, so it’s difficult to get excited about this market for any significant amount of time.

GBP/USD Video 16.10.19

Ultimately, short-term back and forth range bound systems should continue to work for a short-term smash and grab type of trades, with the obvious ceiling being the last couple of days. If we were to break above the highs from the last couple of sessions, then the market probably goes looking towards the 1.28 level. Otherwise, we could break down towards the 1.25 level which of course is a large, round, psychologically significant figure, and it should also be noted that the 200 day EMA is slicing through the last couple of candles as well. Ultimately, this is a market that is trying to figure out what to do after the recent explosion higher, so that being said it makes quite a bit of sense that we will see a major “flush lower” if we break down below the 1.25 handle.

Please let us know what you think in the comments below

GBP/USD, USD/CAD, USD/MXN – North American Session Daily Forecast

After an impressive late-week rally, GBP/USD has settled down early this week and is range-bound. In the North American session on Tuesday, the pair is trading at 1.2646, up 0.29% on the day.

Brexit Negotiations Continue

Negotiations continue at a feverish pace, as London and Brussels and continue to try and hammer out a withdrawal agreement, with only two weeks to go before the U.K. is scheduled to depart the EU. The main sticking point continues to be the Irish border, with the EU insisting on a customs border between Ireland and Northern Ireland, which would be a problematic arrangement for the U.K. Can the sides come up with a creative solution? The pound soared last week on news that the sides were close to an agreement, and traders can expect further volatility this week, as the sides rush to reach an agreement before the October 31 deadline.

Technical Analysis

GBP/USD has been range-bound since Friday. The pair tested resistance at 1.2653 earlier on Tuesday. Above, there is resistance at 1.2750. On the downside, there is support at 1.2585.

GBP/USD 4-Hour Chart

USD/CAD

USD/CAD recorded sharp losses to end the week, but has leveled off this week. In Tuesday’s North American session, the pair is trading at 1.3234, up 0.06%.

Investors Brace for Soft Cdn. CPI

Canadian consumer inflation contracted in August, marking the second decline in three months. The September data will be published on Wednesday. The markets are expecting another decline, with an estimate of -0.3%. Traders can expect pressure on the Canadian dollar is inflation declines for a second straight month.

Technical Analysis

USD/CAD remains range-bound this week. The pair is putting strong pressure on resistance at 1.3240 and could test this line later on Tuesday. On the downside, there is immediate support at the round number of 1.3200. The pair tested this line on Friday but has since retraced upwards.

USD/CAD 4-Hour Chart

USD/MXN

USD/MXN is flat in Tuesday trade. In the North American session, the pair is trading at 19.26, down 0.03% on the day.

Technical Analysis

After gains of above 1.0% last week, the Mexican peso continued its downward movement and tested support at 19.30. This level had remained intact since early August. The pair is within striking distance of support at 19.20 and with the trend pointing down, this level could be tested during the week. Above, there is resistance at 19.45.

GBP/USD is in a Strong Bullish Trend Targeting 1.2785 and Above

Dear Traders,

The GBP/USD is strongly bullish and we should see a continuation of the move.

The POC comes within 1.2560-80. As long as the price is supported above it we should see an uptrend. The pair is targeting 1.2690 and 1.2786. If we see a 4h or daily close above 1.2786, there is a possibility for a further target M H5 camarilla/ Wizz 6 confluence at 1.2930. Pay attention to momentum as we might see good volatility due to ATR (5), which is 177 pips.

The analysis has been done with the CAMMACD.MTF template.

For more daily technical and wave analysis and updates, sign-up up to our ecs.LIVE channel.

Many green pips,
Nenad Kerkez aka Tarantula FX
Elite CurrenSea

GBP/USD Daily Forecast – Sterling Little Moved After UK Jobs Report

Sterling Volatility Could Jump Higher Ahead of EU Summit

It is an important week for the United Kingdom as a potential deal could be announced as soon as today, that will facilitate an orderly exit from the EU.

Negotiations between the EU and UK will end ahead of the EU summit that takes place on Thursday and Friday. For that reason, if a deal is to be made, it should be announced relatively soon.

On the other hand, if the two parties are not able to reach a deal, the most likely scenario is that the UK will ask for an extension. This would accompany an election and all sorts of uncertainty.

For this reason, the Sterling exchange rate is likely to be very volatile over the next two sessions. Traders will be closely watching their news feeds for any incoming data and repricing the exchange rate accordingly.

Technical Analysis

The markets started pricing in a premium for a no-deal exit even before Boris Johnson was elected as Prime Minister. At this point, it looks like there is a bit of an unwinding of this position following news last week that the UK is moving closer towards a deal.

In this context, I expect the British pound will be well bid in the absence of news. To be clear, there have been negative headlines since the start of the week, but I am speculating it will take something concrete that suggests a deal won’t be reached to trigger a reversal in the Sterling rally.

GBPUSD 4-Hour Chart

From a technical perspective, the pair broke to a 3-month high on Friday and carries a bullish near-term bias. Last week, the pair was held lower by the 1.2700 level. I see some further resistance at 1.2738.

The pair certainly looks strong and any indication that Brexit talks are going smoothly might just offer the markets a reason to bid it up further. I see some potential for the pair to extend gains towards resistance at 1.2924.

In yesterday’s forecast, I was looking at a horizontal level at 1.2575 to the downside. The level had already been breached but buyers lifted the pair back above in the New York session and the pair regained strength. I’m still looking at this same level for downside support.

Bottom Line

  • GBP/USD is well bid as investors view the odds of a no-deal scenario lessening.
  • Sterling is likely to see a jump in volatility as there are just two days left for negotiating a deal.
  • A break above 1.2738 could see the pair rally all the way to 1.2924.

Guessing The Brexit Door

It is important to remember that the events around Brexit affect not only the British pound but also the euro, not to mention UK stock markets and shares around the world.

Today, October 15, EU ministers will meet in Luxembourg to discuss the latest changes to the deal proposed by the British Prime Minister and discussed with the Prime Minister of Ireland. At this level, the current agreement seems to be working and is unlikely to meet obstacles or negative responses. And that may become quite good news for the pound. But it will be harder in the future.

On October 16, the deal proposals wood need to be finalized before the crucial EU summit. A critical test is a meeting between Macron and Merkel, whose feedback may stall or give further impetus to the discussion. The pound and markets may have to survive a few hours in the background of heightened nervousness. At the EU summit on 17-18 October, Brexit’s discussion is likely to overshadow all issues, including defence, security and climate change. The most important question is whether the European Union will approve Britain’s proposals. Hints and comments from officials long before the final press conference may cause a strong market reaction.

If Brussels and London reach agreement, this new plan should also be approved by the UK Parliament. Prime Minister Johnson hopes that PMs will do this on the special session on a Saturday. Although the markets have met news on Brexit’s postponement very positively earlier, at this stage, the deal will drastically reduce uncertainty and could dramatically increase the purchase of British currency. In this case, Sterling could potentially return to the area above 1.32, where it was in March, from 1.2660 now.

Without the deal approval from the EU, or UK Parliament and MPs, Johnson will have to make an official request to the EU for another three-month postponement. First of all, it will be a return to uncertainty. Markets have a very negative perception of uncertainty so that the initial reaction could be a sell-off of the British currency.

However, there is also a greater chance that during the new deferral Brexit’s opponents may put on a vote an amendment requiring a public vote on the deal with the EU, or even a call for new general election. In the latter case, the chances of Britain’s exit from the EU are reducing, which may have a positive impact on the British currency and return the purchase of risky assets to the markets.

Formally, there is still a realistic chance that Britain may exit from the EU on October 31 without having a finalized deal. Analysts estimate the chances of such an outcome at 5-10%. This scenario could be a black swan for the British markets, like the unexpected outcome of the referendum in 2016. In this case, GBPUSD can decline below 1.20 very quickly, causing a shock wave in the markets.

This article was written by FxPro

A Fragile State Of Trade War Neutrality

Beyond chiselling out those details, doubts continue to swirl whether China and the U.S. can reach a full trade agreement to end the trade spat. Investors were reluctant to jump on the rally bus while enthusiasm about the potential for a significant U.S.-China trade breakthrough waned.

But this possibly goes well beyond a tariff detente as trade friction has also spread to technology and financial sectors in the past few months. Suggesting, the U.S. administrations attitude towards China does not appear to have improved significantly.

Given the recent economic war escalations, it might suggest we remain in a fragile state of “phase one” trade war neutrality unsure if it may last or even what sweeteners and apparatus have been constructed to ensure both parties compliance.

While bullish momentum has faded somewhat, risk steadied overnight when Treasury Secretary Mnuchin said U.S. and China reached “fundamental agreement” on several trade issues last week and a tweet from the Global Times’ editor-in-chief sketched a more cheerful outlook.

Oil markets

Oil dropped the most in two weeks amid concern that the recent U.S.-China trade talks won’t lead to a deal reinforcing the fact that the outcome of the agreement is probably the most significant near-term factor for oil sentiment.

Indeed, a definite conclusion of trade talks, even a phase one deal, could do a great deal to alleviate those gnawing emotional concerns about global demand as traders continue to wear demand sensitivities on their sleeve.
But oil prices stabilised after calming trade talk comments from Treasury Secretary Mnuchin.

While oil traders are all too knowing that chasing headline risk is fraught with peril. But demand erosion from the trade war is such an overwhelming pervasive bearish skew; it might be impossible for traders to ignore the ebb and flows from headline risk.

Currency market

The Japanese Yen

Risk markets fell under pressure after headlines reported China wants more talks before it signs up to the tentative trade deal announced by the U.S. on Friday.

USDJPY slipped to 108.05 from 108.20 but remained bid on the dip after risk market steadied

The British Pound

The Pound looked a little perky slicing through 1.2600 in the late New York afternoon possibly due to the absence of any negative headline suggesting that the talks are not breaking down.

The Chinese Yuan

The Yuan may remain stable while the phase one trade deal gets chiselled out within the current 7.05-7.10 level While the Yuan rallied convincingly in Asia yesterday down to 7.05 USDCNH level , the weaker China trade data provided a stark reminder if not a reality check that a weaker Yuan from a pure fundamental landscape may still be in the cards.

But given the extremely high probability of a Phase 1 deal getting inked, a subsequent Yuan currency accord and China’s ongoing commitment to stabilising the Yuan, 6.90 USDCNH now appears to be a reasonable target for USDCNH at the end of 2019 assuming phase 2 and 3 remain on target.

Of course, this view differs wildly by 30 “big figures” from some banks analyst who are pegging year-end USDCNH at 7.20 expecting no significant developments from the phased-in trade talks.

ADXY

Yesterdays USDAsia selling flows were reversed overnight after a run of not so friendly trade talk headlines. But with markets zeroing in on ADXY 103.70 resistance which has thwarted several rallies in 2019, the reversal may also have been compounded by some profit-taking.

While positive momentum is building and the rally in local currencies may extend further particularly on the basket of THB/SGD/IDR/MYR/KRW, traders may be waiting for this fundamental level (103.7 ADXY) to breach on a closing basis to confirm the next bullish leg higher.


Bloomberg

Gold markets

Gold is trading firmer this morning but off overnight highs. Headline risk will continue to dominate, but at the end of the day, what matters most for gold is lower interest rates. And through all this tangled web of headline and phased in confusion, there is one essential narrative that seems to be getting lost.

There is a difference between detente and a deal. A detente means things don’t get worse, but it doesn’t implicitly suggest that global economic conditions get better at once. So, with the latest run of weaker financial data implying that central banks may keep interest rates lower for longer, gold could remain supported short term.

And despite hopes building on a trade truce and a Brexit breakthrough, defensive positioning remains high. And predictably so as if trade talks are struggling at this soft-pedalled level, discussions may not get more comfortable when the complicated intellectual property and technology transfer issues get tabled.

But over the near term, gold could face significant fundamental headwinds in the form of higher US yields and improved equity market risk sentiment especially as we move through to phase 2 and 3 of the US-China trade deal. And if a comprehensive trade deal is inked in November, then the extremely extended long gold positions might be prone to a significant correction lower.

FX Traders who are caught offside may look for opportunities to pare back currency risk aversion trades, as such gold investors need to respect the underlying movement on the Yuan and Yen. USDCNH 7.0 and USDJPY 109.00 are a hugely critical “risk-on” sentiment level

This article was written by Stephen Innes, Asia Pacific Market Strategist at AxiTrader

Brexit and Economic Data Keep the GBP and the EUR in Focus

Earlier in the Day:

It was a relatively busy day on the economic calendar through the Asian session this morning.

China’s September inflation figures provided direction ahead of finalized August industrial production figures out of Japan due out later this morning

In the early part of the day, the RBA also released its meeting minutes from last Tuesday’s meeting.

On the geopolitical front, sentiment towards the latest on the U.S – China trade talks and Brexit also influenced early on.

For the Aussie Dollar

Following last week’s rate cut, the RBA meeting minutes had limited influence on the Aussie Dollar. Salient points from the October Minutes included:

  • Risks to the global growth outlook remained tilted to the downside.
  • Businesses scaled back investment plans as a result of the technology and trade disputes between the U.S and China.
  • Further monetary policy easing was delivered to support employment and income growth and greater confidence that inflation would be consistent with the medium-term target.
  • Members noted that the unemployment and inflation outcomes were likely to fall short of forecasts in the near-term.
  • Subdued wage growth also suggested that spare capacity remained in the economy.
  • In spite of strong employment growth, however, the spare capacity remained, with employment growth expected to slow.
  • While lower interest rates could affect confidence, it would also support household cash flows and spending.
  • It was also noted that members were prepared to ease monetary policy further if needed.

The Aussie Dollar moved from $0.67694 to $0.067703 upon release of the minutes that preceded China’s inflation figures.

From China

The annual rate of inflation picked up from 2.8% to 3.0%, coming in ahead of a forecast of 2.9%. Month-on-month, consumer prices rose by 0.9%, coming in ahead of a forecasted and August 0.7%.

Wholesale fell further in September, however, with wholesale prices falling by -1.2% compared with September 2018. While in line with forecasts, the pace of deflation picked up from August’s 0.8%.

The Aussie Dollar moved from $0.67865 to $0.67849 upon release of the figures. At the time of writing, the Aussie Dollar was flat at $0.6775.

Elsewhere

At the time of writing, The Japanese Yen was up by 0.09% to ¥108.30 against the U.S Dollar, while the Kiwi Dollar was up by 0.11% to $0.6306.

The Day Ahead:

For the EUR

It’s a relatively busy day ahead on the economic calendar. Germany and the Eurozone’s ZEW economic condition figures are due out later this morning.

French finalized September inflation figures and Germany’s ZEW current conditions figures will likely have a muted impact on the EUR.

Outside of the numbers, we can expect direction to also come from Brexit as the Brexit clock ticks away.

At the time of writing, the EUR was up by 0.04% to $1.1031.

For the Pound

It’s a busy day ahead on the data front. August earnings and unemployment figures are due out along with September’s claimant count numbers.

We can expect the Pound to show greatest sensitivity to the wage growth and claimant count figures. Any unexpected rise in the unemployment rate, coupled with larger than anticipated increase in claimant counts would weigh heavily, however.

While we expect the stats to influence, Brexit will continue to be the key driver. A further pullback from Friday’s recent high should be expected should little progress be made on a deal.

At the time of writing, the Pound was up by 0.06% to $1.2616.

Across the Pond

It’s a relatively quiet day ahead on the economic calendar. October’s NY Empire State Manufacturing Index figures are due out later today.

With tariffs still in place, any further deterioration in manufacturing sector conditions would be negative.

Chatter from the Oval Office would require monitoring, however. There’s also Brexit to factor in, with any negative news considered Dollar positive.

The Dollar Spot Index was down by 0.04% to 98.417 at the time of writing.

For the Loonie

It’s a quiet day on the economic calendar. There are no material stats out of Canada to provide the Loonie with direction.

The lack of stats will leave the Loonie in the hands of crude oil prices later in the day.

The Loonie was up by 0.02% at C$1.3232, against the U.S Dollar, at the time of writing.

GBP/USD Price Forecast – British Pound Runs Into Major Resistance

The British pound fell during most of the trading session on Monday as traders ponder the idea of breaking above the 200 day EMA. Regardless of what you believe about the Brexit situation, it’s relatively obvious that the market has got ahead of itself in the last couple of days. While there will continue to be a lot of noisy trading in this general vicinity, a break down below the 1.25 level could open up the door to a recapturing of the 50 day EMA by the sellers. The 200 day EMA of course is a longer-term signal as to trend, so that will be paid close attention to as well.

GBP/USD Video 15.10.19

To the upside, the 1.28 level will offer a significant amount of resistance that will be difficult to overcome, and as a result a break above there would have to be paid attention to for a potential longer-term move. If we did break above there, then the market is almost certainly going to go looking towards the 1.30 level. It will almost need some type of good news to make that happen though, because quite frankly we have gone so far in such a short amount of time is difficult to imagine a scenario where traders have that much more juice to push the market to the upside. At the very least, a pullback is needed over the next couple of days as markets can’t go in one direction forever.

Please let us know what you think in the comments below

GBP/USD Daily Forecast – Sterling Edges Lower After Sharp Surge

Sterling is Poised for a Volatile Week

GBP/USD broke to a 3-month high last week as investors saw the odds of a no-deal Brexit declining. The shift in investor sentiment came after a joint statement from UK PM Johnson and Irish Prime Minister Leo Varadkar who said they saw a “pathway for a potential deal”.

News over the weekend sours the optimism a bit as EU and UK officials have both said that there is still quite a way to go to secure a deal. With time running down, the Sterling pairs are poised to have a volatile couple of days.

The UK is scheduled to leave the EU on October 31, even if a deal is not secured. Currently, it looks like they will request an extension rather than leave without a deal.

Negotiations End Wednesday

But more important than the October 31 deadline, a deal should be agreed on at the EU summit which starts on Thursday. That means negotiations should be completed by Wednesday so that a decision can be made during the summit. UK parliament then holds a rare Saturday meeting to decide what to do next.

In this context, there are only three days left, including today, for an orderly exit. If a deal is not made, it will introduce all sorts of uncertainties. It is still unclear why PM Johnson insists the UK will leave without a deal even though he legally has to ask for an extension if he is unable to secure a deal. The only way around this point is if he can convince parliament to go along with his plan which seems unlikely.

Further, the UK is likely to have an election if a deal is not made, in an attempt to break the impasse. Also, even though the law states a three-month extension will be asked for, this can easily change to a longer or shorter time frame. It is important to note that EU officials will need to unanimously agree to the extension.

The British pound will be sensitive to ongoing headlines over the next few days. The Queen’s speech takes place today. However, it is not expected that any major announcements will be made that will cause drastic shifts in GBP/USD.

Technical Analysis

The rally in GBP/USD on Friday was capped by the 1.2700 handle and the pair has been moving lower since. There seems to be a general lack of buying as the decline has been persistent although it is lacking momentum.

GBPUSD 4-Hour Chart

Support for the pair at 1.2575 has broken but how the pair trades around this level will be important for the session ahead. I suspect a push back above it could lead to another attempt to scale above 1.2700.

If the level fails to hold, the next area of support I am watching falls at 1.2486. Generally speaking, I think the pair will remain bid considering there was a premium priced in for a no-deal scenario. While that is not off the table, it certainly does not seem wise to position for it at this time.

Bottom Line

  • Volatility is likely to increase even more as the clock winds down for Brexit negotiations.
  • Negotiations will complete on Wednesday, ahead of the EU summit.

A Light Economic Calendar Puts the GBP and Brexit in the Limelight

Earlier in the Day:

It was a relatively quiet day on the economic calendar through the Asian session this morning.

China’s September trade figures provided direction at the start of the week.

On the geopolitical front, the Asian equity markets responded to the positive updates on Brexit and trade negotiations.

In the FX markets, however, the mood was less bullish. Existing punitive tariffs remain that suggest more doom and gloom before any pickup in economic activity.

From China

The U.S Dollar trade surplus widened from $34.84bn to $39.65bn in September. Economists had forecast a narrowing to $33.30bn.

  • Year-on-year, exports fell by 3.2%, which was worse than a forecasted 3.0% fall. In August, exports had fallen by 1.0%.
  • Imports fell by 8.5%, year-on-year, in September, which was worse than a forecasted fall of 5.2%. Imports had fallen by 5.6% in August.

The Aussie Dollar moved from $0.67760 to $0.67861 upon release of the figures. At the time of writing, the Aussie Dollar was down by 0.15% to $0.6784.

While the trade surplus widened, a slide in imports suggests waning demand that could spell trouble in the months ahead.

Elsewhere

At the time of writing, The Japanese Yen was down by 0.03% to ¥108.32 against the U.S Dollar, while the Kiwi Dollar was down by 0.49% to $0.6306.

The Day Ahead:

For the EUR

It’s a relatively quiet day ahead on the economic calendar. The Eurozone’s August industrial production figures are due out of the Eurozone.

Following an unexpected pickup Germany, forecasts are EUR positive.

Outside of the numbers, we can expect direction to also come from Brexit and any chatter on trade.

At the time of writing, the EUR was down by 0.13% to $1.1028.

For the Pound

It’s a quiet day ahead on the data front. There are no material stats due out of the UK to provide the Pound with direction.

The lack of stats will leave the Pound in the hands of Brexit chatter throughout the day. The EU Summit is now within sight and Boris Johnson has just days to finalize a deal with the EU.

Expect Pound sensitivity to Brexit chatter to remain heightened at the start of the week.

At the time of writing, the Pound was down by 0.59% to $1.2593. A lack of progress from the weekend weighed on the Pound early on.

Across the Pond

It’s also a quiet day ahead on the economic calendar. There are no material stats to provide the Greenback with direction on the day.

The lack of stats will leave geopolitics in focus. Any further easing in geopolitical risk would be considered Dollar negative.

The Dollar Spot Index was up by 0.14% to 98.436 at the time of writing. Support kicked in early as trade talks failed to lead to a removal of existing tariffs.

For the Loonie

It’s a quiet day on the economic calendar. There are no material stats out of Canada to provide the Loonie with direction.

We can expect market risk sentiment through the day to influence. Trade data out of China and no suggestion of the removal of existing tariffs were negatives early on.

The Loonie was down by 0.05% at C$1.3209, against the U.S Dollar, at the time of writing.

The Week Ahead – Brexit, Earnings, Stats and the IMF and EU Summit in Focus

On the Macro

For the Dollar:

It’s a busier week ahead on the economic calendar.

NY Empire State Manufacturing figures for October get the week going on Tuesday. The focus will then shift to September retail sales figures due out on Wednesday.

With a heavy reliance on consumer spending, the numbers will need to be in line with forecasts to provide Dollar support.

On a busy Thursday, September building permit and housing start figures are due out along with October’s Philly FED Manufacturing numbers.

September industrial production and the weekly jobless claims figures are also due out.

With no material stats due out on Friday, Wednesday’s retail sales and Thursday’s Philly FED numbers will have the greatest impact.

Outside of the stats, trade war chatter will continue to be a factor, as will any further talk of impeachment.

The Dollar Spot Index ended the week down by 0.55% to $98.301.

For the EUR:

It’s also a relatively quiet week ahead on the economic data front.

Industrial production figures on Monday and German and Eurozone economic sentiment figures on Tuesday will influence early in the week.

The Eurozone’s September inflation and industrial production figures due out on Wednesday will also provide direction.

We would expect finalized inflation figures out of France and Italy to have a muted impact on the EUR, however.

With no material stats due out in the latter part of the week, geopolitical risk will remain in focus.

Any talk of U.S tariffs on EU goods and chatter on Brexit ahead of the 19th October EU Summit will also need considering.

The EUR/USD ended the week up by 0.58% to $1.1042.

For the Pound:

It’s another busy week ahead on the economic calendar.

Key stats include employment figures due out on Tuesday, inflation figures on Wednesday and retail sales numbers on Thursday.

On the data front, claimant counts, inflation and retail sales figures will be the key drivers in the week.

On the Brexit front, there would be more upside for the Pound should Johnson finalize a deal ahead of next weekend’s EU Summit.

The GBP/USD ended the week up by 2.73% to $1.2668.

For the Loonie:

It’s a relatively busy week ahead on the data front.

Key stats include September inflation figures due out on Wednesday and August manufacturing sales numbers due out on Thursday.

On the data front, we would expect the inflation figures to be the key driver in the week.

From elsewhere, trade data, industrial production and 3rd quarter GDP numbers out of China will also influence.

The Loonie ended the week up by 0.83% to C$1.3203 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s another relatively quiet week ahead.

Key stats are limited to September’s employment numbers due out on Thursday.

On the monetary policy front, the RBA minutes are due out on Tuesday and could pressure the Aussie Dollar should there be suggestions of more rate cuts to come.

From elsewhere, economic data out of China on Monday and Friday will also influence.

The Aussie Dollar ended the week up by 0.34% to $0.6794.

For the Japanese Yen:

It’s a relatively quiet week ahead on the economic calendar.

Key stats are finalized industrial production figures due out on Tuesday and inflation and trade data on Friday.

We would expect the stats to have a relatively muted impact on the Yen, however.

Geopolitics and economic data out of the U.S and China will likely have the greatest impact in the week.

The Japanese Yen ended the week down by 1.26% to ¥108.29 against the U.S Dollar.

For the Kiwi Dollar:

Stats are on the quieter side in the week ahead.

Economic data is limited to 3rd quarter inflation figures that are due out on Wednesday. We can expect the Kiwi to be particularly sensitive to the numbers.

From elsewhere, stats from China will also influence in the week.

The Kiwi Dollar ended the week up by 0.27% to $0.6337.

Out of China:

It’s a busy week on the economic data front. Economic data includes trade data due out on Monday and inflation figures on Tuesday.

The focus will then shift to a busy Friday. Stats on Friday include fixed asset investment, industrial production and 3rd quarter GDP numbers.

We expect trade data, industrial production, and the GDP numbers to have the greatest impact on market risk sentiment.

The impact of any weak numbers could be buffered, however, by any further positive chatter on trade.

The Yuan ended the week up by 0.83% to CNY7.0892 against the Greenback.

Geo-Politics

Impeachment: With the U.S and China making progress on trade, impeachment chatter could return in the week ahead.

Trade Wars: 15th October U.S tariffs on Chinese goods have been postponed as progress was made last week. For real progress to be made, however, the U.S would need to remove existing tariffs that continue to hurt the Chinese economy. Expect more chatter in the week, which will influence risk sentiment.

UK Politics: Brexit talks continue, with a deal now needed to support further the Pound ahead of the EU Summit. Any suggestions that the latest proposal is inadequate and expect the Pound to slide.

The Rest

Earnings:  It’s a big week ahead, with U.S banks Citi, Goldman, JPMorgan, and Wells Fargo announcing.

EU Summit: It is make or break for Boris Johnson and the Brexiteers. Will there finally be an agreement for the British PM to take back to parliament?

IMF Annual Meeting: Chatter on the global economy and what can be done to drive growth will influence. Will there be any agreements to ramp up fiscal spending to offset the effects of the ongoing U.S – China trade war?

The Weekly Wrap – Progress on Brexit and Trade Delivered in the Week

The Stats

It was a quieter week on the economic calendar in the week ending 11th October.

A total of 44 stats were monitored throughout the week, following 74 stats from the week prior.

Of the 44 stats, 17 came in ahead forecasts, with 22 economic indicators coming up short of forecast. 5 stats were in line with forecasts in the week.

Looking at the numbers, 19 of the stats reflected an upward trend from previous figures. Of the remaining 25, 20 stats reflected a deterioration from previous.

While the economic data was skewed to the negative, the Dollar struggled in the week, as demand for the dollar eased off the back of positive updates from trade talks and Brexit.

The U.S Dollar Index (“DXY”) fell by 0.55% to end the week at $98.301.

Out of the U.S

It was a relatively quiet week on the economic data front. Wholesale inflation figures on Tuesday and September inflation figures on Thursday provided direction early in the week.

wholesale and consumer prices were on the softer side in September, pinning back the greenback.

On Friday, positive Michigan’s consumer expectations and sentiment figures failed to support the Greenback.

Off less influence in the week, were JOLTs job openings, initial jobless claims and import and export price index figures.

Outside of the stats, the FOMC meeting minutes revealed some debate on when to end the current rate path. Rising concerns over the economic outlook suggested that more cuts could be on the way.

The reality was, however, that just 7 of 17 FOMC members foresaw a further rate cut before the year-end.

Downside for the Dollar ultimately came from an easing in geopolitical risk, with most of the damage coming at the end of the week.

In the equity markets, a Friday rebound pulled the majors into the green for the week. The Dow and S&P500 ended the week up by 0.91% and 0.62% respectively, with the NASDAQ up 0.93%.

Out of the UK

It was a busy week on the economic calendar.

Key stats included GDP, industrial and manufacturing production and trade data on Thursday.

While production was on the slide, quarter-on-quarter GDP numbers continued to show the UK economy dodging a recession. The numbers were ultimately Pound positive.

Of less influence in the week were housing sector figures, labor productivity, and retail sales numbers.

While the stats were supportive of the Pound, the upside ultimately came from Brexit news.

Progress towards a possible trade deal, ahead of next week’s EU Summit, drove demand for the Pound.

The Pound ended the week up by 2.73% to $1.2668.

For the FTSE100, a stronger Pound failed to pressure the 100, with the index rising by 1.28%.

Out of the Eurozone

It was particularly quiet week on the economic data front.

Germany’s factory orders and trade data provided little support in the week, with factory orders falling again and the trade deficit narrowing.

On the positive, however, was an unexpected rise in industrial production.

At the end of the week, finalized September inflation figures out of Germany and Spain had a muted impact on the EUR.

On the monetary policy front, the ECB monetary policy meeting minutes also left the EUR unscathed.

The upside in the week ultimately came from positive updates on Brexit and progress on the U.S – China trade talks.

For the week, the EUR rose by 0.58% to $1.1042.

For the European major indexes, the DAX30 rallied by 4.15%, with the EuroStoxx600 and CAC40 up by 3.23% and 3.00% respectively.

Elsewhere

It was another positive week for the Aussie and Kiwi Dollars.

The Aussie Dollar rose by 0.34% to $0.6794, while the Kiwi Dollar gained 0.27% to $0.6337.

For the Aussie Dollar

It was a quiet week for the Aussie Dollar.

Economic data was limited to September’s business confidence and October consumer sentiment figures.

Both business and consumer confidence figures disappointed in the week, pinning back the Aussie Dollar.

Of less influence were home loan figures that continued to reflect improved housing sector conditions.

In spite of the negative bias on the stats, a Friday rally in the Aussie Dollar delivered the gains for the week. Positive updates on trade talks delivered the upside on the day.

For the Kiwi Dollar

The stats were, once more, skewed to the negative in the week.

September’s Business PMI held steady at 48.4, coming up short of a forecast of 49.0. Electronic card retail sales also came up short of forecasts, whilst up by 0.4% in September.

While the stats were skewed to the negative on Friday, a 0.27% gain on the day gave the Kiwi Dollar the upside for the week.

For the Loonie

Through the 1st half of the week, housing sector figures impressed, proving some support.

Employment figures on Friday were the key driver, however, with the unemployment rate falling from 5.7% to 5.5%. A 53k rise in employment, following an 81.1k increase in August, delivered on the day.

Positive updates from trade talks also delivered provided support late in the week, with WTI and Brent gaining 3.58% and 3.54% respectively.

The Loonie ended the week up by 0.83% to C$1.3203 against the Greenback.

For the Japanese Yen

It was a relatively quiet week on the data front. Stats were limited to August household spending figures that came in worse than forecasts.

While the stats were Yen negative, the downside from the Yen came from an easing in geopolitical risk.

Safe-haven demand waned as progress on Brexit negotiations and trade talks spurred demand for riskier assets.

For the week, the Japanese Yen fell by 1.26% to ¥108.29.

Out of China

It was a quiet week on the economic data front.

September’s service sector PMI, which reported slower sector growth, tested risk sentiment on Monday.

A lack of stats through the remainder of the week left updates from the U.S – China trade talks to influence risk sentiment.

The Yuan rose by 0.83% to CNY7.0892 against the Greenback.

GBP/USD Weekly Price Forecast – British Pound Skyrockets

The British pound has skyrocketed during the week, mainly due to a few blurbs here and there on the news about how the negotiations are going better, and that perhaps a “path to a deal can be seen.” That seems to be a lot to base your trading on, so I suspect that a lot of this is probably due to short covering more than anything else. With that being the case, I would be a bit leery about going long now, because I do recognize that if Brexit is solved and the markets are suddenly going to be in and uptrend, you have plenty of time to enter on pullbacks. As far as selling is concerned, well obviously you can’t do that.

GBP/USD Video 14.10.19

Quite frankly, this is a situation where the market just can’t be touched. The British pound is still technically in a downtrend, so that is something to pay attention to but ultimately it’s going to be far too news driven at this point to put any money to risk. I know that it seems like this could be the trade of the century, and quite frankly it can but that will be later, as soon as we have some type of certainty. Don’t worry about the initial impulsive move higher, or perhaps even the major selloff. Let it come back to you at a much more reasonable price and then participated. That’s how the real money will be made.

Please let us know what you think in the comments below

GBP/USD Price Forecast – British Pound Screams Higher Again

The British pound has skyrocketed in value of the last couple of days, as headlines keep coming out that progress is being made in the Brexit deal. However, the one thing that has not come out is anything along the lines of context. This has all been done via rumor, and therefore it wouldn’t take much to shock the market back into selling off. Beyond that though, I jumping into the market here would be reckless to say the least, as we are starting to see a lot of questions being asked right at the 200 day EMA which of course a lot of longer-term traders will define the trend by.

GBP/USD Video 14.10.19

That being said, if this does end up being a longer-term trend change, you will have plenty of time to get in later, instead of chasing a market that has rallied 400 pips in two days. Unfortunately, far too many new traders will do exactly that, and then get smoked in the process.

Once Brexit is done, I would expect to see a bit of a drive higher in the British pound, but eventually we will level off and then pulled back. That will be your best buying opportunity because it will offer a multi your trade. That being said though, we are just as likely to see bad news come out and spook the market again. If that’s going to be the case, we could see the market drop 200 pips in the blink of an eye. Because of this, you need to keep your position size very small.

Please let us know what you think in the comments below

GBP/USD, USD/CAD, USD/MXN – North American Session Daily Forecast

GBP/USD continues its impressive late-week rally. In Friday’s North American session, the pair is trading at 1.2564, up 1.08% on the day.

Cable Soars to 13-Week High

The pound has climbed to its highest level since early July, after the leaders of the U.K. and Ireland met for Brexit talks and said that they “agreed that they could see a pathway to a possible deal.” This has renewed optimism that a no-deal scenario, which would be detrimental to the British economy, can be avoided. Further signals that a withdrawal deal is at hand could continue to boost the pound.

Technical Analysis

GBP/USD punched above several resistance lines on Thursday, and the upward movement has continued on Friday. The pair has moved some distance away from 1.2420, which had held in resistance since late September, prior to Thursday. The main trend remains up, with the next resistance line at 1.2585. This line is under pressure and could be tested in the Friday session.

GBP/USD 4-Hour Chart

USD/CAD

USD/CAD is trading sideways on Friday. In the European session, the pair is trading at 1.3272, down 0.12%. Traders should keep a close eye on Canadian employment data, which will be released in the North American session. The economy is projected to create 11.2 thousand jobs, a far cry from the spectacular gain of 81.1 thousand in the previous release.

Technical Analysis

USD/CAD continues to test support at 1.3280. If the pair can continue the downward momentum, it could put pressure on 1.3240, which is the next support level.

USD/CAD 4-Hour Chart

USD/MXN

Peso Climbs to 9-Week High

USD/MXN continues to lose ground late in the week. On Friday, the pair is trading at 19.36, down 0.48% on the day. This follows a decline of 0.74% on Thursday.

Technical Analysis

USD/MXN tested support at 19.46 on Thursday and has continued the downward movement on Friday. The pair is putting pressure on support at 19.30, which has remained intact since early August. On the upside, there is resistance at 19.70.

USD/MXN 4-Hour Chart