David Morrison  |  14/01/2019 07:52
Brexit Voting, Again!
 
The UK’s ‘Meaningful vote’ on Brexit takes place in Parliament on Tuesday. Prime Minister Theresa May postponed the original vote back in December as she was unable to muster up enough support for her deal. Yet one month on she’s still expected to lose as her position has deteriorated significantly while Brexit itself looks in serious doubt. This has led to a recovery in sterling over the past fortnight as the prospect of a ‘no-deal’ Brexit has faded.
 
Looking at the charts, cable has now broken above resistance around 1.2800. Bear in mind that the pair fell below 1.2450 at the beginning of the year. Of course, where sterling goes from here depends on Tuesday’s vote and Theresa May’s response. But traders have begun to price out a hard Brexit while pricing in the prospect of a continued close alignment with the EU. What would cause greater uncertainty would be a second referendum. While many investors believe this would result in the UK voting to stay in the EU, there’s also a chance that the leave vote share increases as the public express their disgust with the political classes. But this is an issue for another trading day. In a bullish scenario we could see the pair reach the 1.3150-1.3200 area in an intermediate time frame while bearish take could mean a pull-back to 1.2650 or even 1.2500.
 
The euro has made decent gains versus the dollar since the beginning of the year. This is despite a clutch of weak economic data releases from the Eurozone last week. Most of the euro-USD’s recent strength can be blamed on dollar weakness as the US Federal Reserve under Jerome Powell has suddenly undertaken a dovish pivot. The market no longer expects any rate hikes in 2019 despite the FOMC forecasting 2 less than a month ago. On top of this, there’s growing speculation that the Fed may halt its balance sheet reduction programme which was previously understood to be on autopilot at around $50 billion per month. But with the UK’s meaningful vote in prospect, the euro should benefit as long as there’s no possibility of a no-deal Brexit. On a longer timeframe EURUSD bulls will target 1.1700-1.1800 area. Support currently comes in around 1.1400/1.1350 while break below 1.1300 raises the probability of a retest of November lows around 1.1200.
  
GOLD OPTIONS
 
The most important mid and long-term chart is Gold in our view. Instability in the world economy, the lower than expected US treasury yield environment and uncertainty over the Fed’s next move all help to support gold. Last Friday saw a significant increase in COMEX call option activity, around $3 billion in notional value, which is another indication that traders are taking out some insurance in this traditional safe-haven.
  
Gold Daily Chart
 
Chart-wise, gold is forming a bullish flag pattern. Confirmation would come with a daily close above 1296. Then there’s a key area of resistance between 1305 and 1310 range remains strong. But gold is currently back in a bull trend and pullbacks have been met with heavy buying. This positive outlook could change if we saw some closes below 1280-1275 area. Otherwise, and assuming the bull flag is confirmed then gold could be on course to revisit the 2018 highs.
 
Hope you have a profitable trading week!
 

Other Weekly Views

  • Is The Worst Over For EURUSD ?
    David Morrison

    Last week saw the release of yet more dismal economic data from Euro zone.

  • Fed confirms dovish pivot
    David Morrison

    But markets confused after strong data

  • Federal Reserve and Non-Farm Payrolls in focus
    David Morrison

    Busy week ahead

  • Chinese growth slows
    David Morrison

    China’s GDP growth continues to slow while there’s no breakthrough on trade talks with the US. Investors look ahead to monetary policy meetings from the Bank of Japan and European Central Bank

  • Powell responds to market volatility
    David Morrison

    US/China trade talks, strong payrolls and dovish comments from Fed Chairman Jerome Powell lifts equities and US Treasury yields while dollar slips

  • Dollar strong as 2019 gets underway
    David Morrison

    The first trading day of the New Year has seen the US dollar soar and equities decline. Meanwhile, gold seems to be back in favour with investors

  • Key Week Kicks Off
    David Morrison

    The US Federal Reserve meets on Wednesday and is expected to raise its Fed Funds rate by 25 basis points

  • Brexit Vote; Is it End or Just the Beginning ?
    David Morrison

    After five days of intense debate, on Tuesday the UK Parliament will vote on the withdrawal bill negotiated between the United Kingdom and the European Union.

  • Busy Week Ahead
    David Morrison

    On Saturday we heard that the US and China had managed to reach a tentative agreement over trade. As a result, President Trump has said that tariffs on Chinese imports to the US will stay at 10% for the next 90 days instead of being raised to 25% on January 1st as previously threatened

  • Fed Speaks Markets React
    David Morrison

    European and US equities were sharply higher early Monday. Investors were cheered by an apparent thaw in EU-Italian relations, a recovery in oil and hopes of a US/China trade breakthrough

  • Stock indices bounce back
    David Morrison

    European and US equities were sharply higher early Monday. Investors were cheered by an apparent thaw in EU-Italian relations, a recovery in oil and hopes of a US/China trade breakthrough

  • Trump administration will struggle to push through further tax reductions
    David Morrison

    Early last week the dollar came under selling pressure as traders expressed their uncertainty ahead of the US midterm elections. It continued to weaken after the Republicans increased their majority in the Senate, but lost control of the House of Representatives.

  • US dollar lost ground as November began
    David Morrison

    After a dismal performance in October, last week saw gobal equity markets rally sharply into the month-end.

  • Economic Calendar
    David Morrison

    On Wednesday the Bank of Japan kept its key interest rate unchanged at minus 10 basis points and its target for 10-year JGBs unchanged at zero. The Nikkei closed 2% higher while the yen was pretty much unchanged in the session.

  • ECB Takes Centre Stage
    David Morrison

    The US dollar continues to be in demand as investors look for safe-havens amid the carnage in global equity markets.

Show More Other Weekly Views

Sentiment

Open a Demo Account Open A Live Account

Losses can exceed deposits

Market Insight's Views

Market Insight analyses will provide both fundamental and technical comprehensions on FX
and other asset classes for Market Insight viewers

RISK WARNING

The information provided herein is for general informational and educational purposes only. It is not intended and should not be construed to constitute advice.

If such information is acted upon by you then this should be solely at your discretion and GKFX will not be held accountable in any way.

  • ForexF
  • IndicesI
  • CommoditiesC
        Back

        Login to Market Insight Account

        Your Market Insight account gives you access to the tools that we offer our customers including our
        Technical Studies & Sentiment for your accounts.

        Forgot Password?

        Don't you have a Market Insight account? With a few easy steps you can easily register to Market Insight

        Create a Market Insight's Account

        Your Market Insight account gives you access to the tools that we offer our customers including our Technical Studies & Sentiment for your accounts.

        register_ty

        Thank you!

        Welcome to Market Insight family!

        You have succesfully completed the registration.
        We will send you an e-mail to give you some
        instructions and our Terms and Conditions!
        Our account representatives will be contacting you as
        soon as possible. If you have any further questions
        please do not hesitate to mail us via info@marketinsight.com