The euro cross has reaffirmed support since last week. The daily RSI lacks momentum, whereas the oscillator is suggesting bullish crossover. The price has well supported 14MA (Weekly) in recent sessions and breaks below this level may pave the wat for lower prices.
Since queen approved the parliament suspension which was requested by Johnson, the GBP is facing think selling pressure across the board and down a percent against the EUR. The suspension makes it more complex for the politicians to block a no-deal Brexit.
The UK is scheduled to leave the EU on October 31, with or without a deal. Markets concerned about the no-deal Brexit on October 31, which hurt the UK economy deeper. The new PM Mr. Johnson made it clear that the UK will leave the EU as scheduled on October 31, with or without a deal.
- Moody’s Analytics said, “A no-deal Brexit would be an unmitigated disaster for the country and something a sizable number of Tory MPs would like to avoid given the political fallout that would ensue.”
- In last week’s note, UBS said: “ The market is now pricing a roughly 50% chance of a no-deal Brexit, which we consider too high”. And said, “In our view, the risks of a no-deal Brexit on October 31 have not increased, but it should bring the situation to a head sooner.”
- Whereas Danske Bank has changed its Brexit call and now they think of two scenarios. (1) A no-confidence vote is leading to an extension (and later a general election) and (2) a no-deal Brexit.
The new GBP technical profiles are consistent bearish until end of October 31. Any optimistic news around the corner could drag the cross to 0.8900 levels. Whereas as long as 0.8890 is a support, we don’t buy the GBP against EUR.
Turning to the latest FX positioning data, GBP positioning remained short. According to Morgan Stanley FX positioning tracker, Strategist Gek Teng Khoo said: “There is room for shorts to build should Brexit uncertainty increase further this week.”
Data review: UK Manufacturing PMI at seven-year low as uncertainty stifles domestic and export markets, according to IHS Markit. UK Manufacturing PMI at 47.4 in August (85-month low).
Data preview: August PMIs are due, whereas the focus remains on Brexit headlines.
The euro cross has reaffirmed support since last week. The daily RSI is stabilizing and, the oscillator is suggesting bullish crossover. The price has well supported at14MA (Weekly) in recent sessions and breaks below this level may pave the wat for lower prices.
On the upside, the trend is supportive, but the market needs to take out the last week high 0.9125 to confirm the trend once again. Keep an eye on the R1 at 0.9125, as a break out above this level would strengthen the upward momentum with a new target the resistance levels around 0.9180-0.9200.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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