Brexit wobbles the pound

The pound consolidated somewhat against the USD, while inched a bit higher against the EUR, JPY and CHF, yesterday. Brexit hopes seem to be on the rise given that UK officials stated that the UK sees the possibility of a Brexit deal within days if the EU moves on fisheries according to media. Also, Europeans seem to be drawing a similarly positive picture, as French officials stated that they hoped to see an agreement in the next few days. The market though seems to maintain a wait and see position for more certain assumptions to be reached before deciding on the pound’s direction. Today’s financial releases could provide some interest for pound traders, yet Brexit and the pandemic remain the main fundamental issues for GBP. GBP/USD remained on a relative sideways motion between the 1.3375 (R1) line and the 1.3285 (S1) level. We tend to maintain our bias in favour of a sideways movement, as long as the pair remains within the prementioned boundaries. Should the bulls take over, we could see the pair breaking the 1.3375 (R1) line and aim for the 1.3470 (R2) level. Should the bears be in charge we could see GBP/USD breaking the 1.3285 (S1) line and aim for the 1.3210 (S2) level.

RBA remains on hold, leaves AUD unimpressed

As was widely expected, RBA remained on hold maintaining the current cash rate at +0.10%, allowing Aussie traders to remain unimpressed. In Governor Lowe’s accompanying statement the bank reiterated that it is not expecting to increase the cash rate for the next three years providing the necessary monetary policy support for the Australian economy. The bank also reiterated that fiscal stimulus is also required in order for the Australian economy to recover as “In the RBA’s central scenario, it will not be until the end of 2021 that the level of GDP reaches the level attained at the end of 2019”. Aussie traders focus on the release of Australia’s GDP rate due out tomorrow, while also RBA Governor Lowe’s speech could gather some interest. AUD/USD also kept a largely sideways motion yesterday remaining within the boundaries formed by the 0.7410 (R1) resistance line and the 0.7300 (S1) support line. For our sideways motion bias to change in favour of a bullish outlook we would require the pair’s price action to break the 0.7410 and some consecutive higher peaks and troughs to appear. Should the pair find fresh buying orders along its path, we could see breaking the 0.7410 (R1) line and aim for the 0.7480 (R2) level. If a selling interest is displayed, we could see the pair aiming if not breaking the 0.7300 (S1) support line.

Other economic highlights today and early tomorrow

Today in the European session, we highlight the release of Switzerland’s GDP rate for Q3, UK’s nationwide house prices growth rate for November, Germany’s unemployment data for November, Eurozone’s preliminary HICP rate for November and New Zealand’s milk auction figures. In the American session, we highlight Canada’s GDP rate for Q3, the US ISM PMI for the manufacturing sector and just before the Asian session starts the US weekly API crude oil inventories figure. As for speakers we note Fed Board Governor Brainard, ECB president Lagarde, San Francisco Fed President Daly and Chicago Fed President Evans. Yet the spotlight is expected to be on Fed Chair Jerome Powell’s testimony before the Senate. We tend to expect the Fed’s Chair to maintain a dovish tone, possibly paving the way for more monetary stimulus, especially given the current inability of US lawmakers to provide a fiscal stimulus. During Wednesday’s Asian session, we expect Aussie traders to have a full day as Australia’s GDP growth rate for Q3 is expected, while RBA Governor Philip Lowe is scheduled to speak and could shed some more light on today’s RBA interest rate decision and the bank’s intentions. Also note that during the Asian session tomorrow, BoJ Deputy Governor Amamiya is scheduled to speak.

GBP/USD H4 Chart

Support: 1.3285 (S1), 1.3210 (S2), 1.3150 (S3)

Resistance: 1.3375 (R1), 1.3470 (R2), 1.3585 (R3)

AUD/USD H4 Chart

Support: 0.7300 (S1), 0.7200 (S2), 0.7100 (S3)

Resistance: 0.7410 (R1), 0.7480 (R2), 0.7560 (R3)

Disclaimer:

This information is not considered as investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced, or hyperlinked, in this communication.

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