The euro cross is around 4.50% from record highs, and trade is showing respect to GBP. No-deal Brexit risks ease the critical driver for the recent GBB rally. As we noted earlier that the lack of any negative news flow on Brexit is positive to GBP at the current scenario for the time being. The latest GDP data supported the pound across the board overnight.

Lowering the odds of a no-deal Brexit in October and rising odds of a general election in November tilting us to remain long GBP against AUD, CAD, CHF, and USD. 

“UK lawmakers have voted in favor of legislation that will compel the government to ask for an extension of the Brexit deadline if a deal is not agreed by 19 October. Our base case is that a no-deal Brexit will not occur on 31 October and a general election will follow” UBS said on Monday.

Data review: The latest UK macro data beat expectations. The gross domestic product grew in July whereas Service sector growth slows in August UK Manufacturing PMI at a seven-year low.

  • UK Services PMI registered 50.6 in August, down from 51.4 in July and signaling only a marginal expansion of service sector output, IHS said.
  • At 47.4 in August, down from 48.0 in July, the Manufacturing PMI fell to its lowest level since July 2012, IHS said.
  • The gross domestic product grew by 0.3% in July 2019, against 0.2% expected. Also, Industrial production up by 0.1% m/m against -0.3% expected.

Data preview: Latest headlines of Brexit are more likely to key theme whereas worth to watch for UK unemployment rate (Tue).

 Technical view

The euro cross has ended the session on a weaker note, with the price closed below 100EA whereas it manages to hold the parallel support level of 0.8890.

The cross is approaching interesting support here at 0.8900-0.8890. The area includes the 100MA and an earlier swing low. So all in, a fairly thick congestion area. Breaking below the level would increase the chances of continuing down towards 0.8840 its 200MA, coincides with 100MA (Weekly) and 20MA (Monthly).

Before overnight’s GDP data, the price was capped by 14MA (Weekly). As long as this resistance watch out for consolidation into ECB meeting (Thu). A decisive breakout above could allow the price to bounce towards 0.91000 levels.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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