Daily Analysis | 10 January 2018
The talks in the Korean peninsula had a good start yesterday, with an agreement for a North Korean delegation in the winter Olympics and military to military talks. The US hailed the Korean negotiations as a first step to solving the North Korean nuclear weapons crisis but on the other hand, they also approved the sale of an antiballistic missile system to Japan. South Korean President Moon vowed not to abandon denuclearisation efforts and gave Trump credit for talks with North Korea. North Korea on the other side, stated that its missiles do not aim South Korea or Japan but the US. Such a statement could strengthen the negotiation process which is on the way, however, it also continues the confrontation with the US and implies that a nuclear disarmament is not on the table as it underscores their “necessity” against the US. The EUR/USD weakened even further yesterday realizing risks which were tilted to the downside as predicted and breaking the 1.1940 support level. It rebounded somewhat during the Asian morning and hovered above the 1.1940 area. We expect the pair to continue to trade in a sideways manner. Please note that the pair traded beneath the 200 Average line for a short-term yesterday in the 4-hour chart and is clearly trading beneath both, the 100 and the 200 Average in the hourly chart which could signal a bearish mood. Also, the relative strength indicator briefly touched 30 and then continued to hover slightly above it, which some may interpret as an indication that the short trade may be overcrowded. Should the pair come under selling interest again today, the pair could break the 1.1900 (S1) support line and aim for the 1.1850 (S2) support barrier. On the other hand, should the pair come under buying interest it could break the 1.2000 (R1) resistance level and aim for the 1.2100 (R2) resistance zone.
- Support: 1.1900 (S1), 1.1850 (S2), 1.1715 (S3)
- Resistance: 1.2000 (R1), 1.2100 (R2), 1.2355 (R3)
Britons more pessimistic on Brexit
Media reports suggest that the British are more pessimistic about the economic consequences of Brexit but remain firm in their Brexit vote, according to a new poll. The mood described in the poll was somewhat supported, as the British chamber of commerce expects an “underwhelming” economic 2018. According to British Finance minister Hammond, the transition period has priority over ultimate Brexit, a statement which could imply a softer Brexit deal. On the other hand EU’s chief negotiator Barmier stated that EU may regard some British financial regulations as equivalent to EU law, however, it would not give financial firms a general “passport” to do business in the EU. On another political front, there seems to be little support for Theresa May’s cabinet reshuffling. Even former allies consider it as a “farce”. So, the effort for a fresher image of the UK government may find little support. Cable dropped somewhat during yesterday’s European morning and continued to trade in a sideways manner later on and during today’s Asian morning well between the resistance level of 1.3620 (R1) and the support level 1.3460 (S1). We expect the pair to continue to trade in a sideways manner in the short term. Any fundamental news about the Brexit may influence the pair as well as any surprise readings on today’s UK’s financial data. Should the bulls take control of the pair, it could break the 1.3620 (R1) resistance line and aim for the 1.3684 (R2) resistance zone. Should the bears take the driver’s seat we expect the pair to break the 1.3460 (S1) support level and hover slightly beneath it. It could prove difficult for the pair to decisively head towards the 1.3330 (S2) support barrier.
- Support: 1.3460 (S1), 1.3330 (S2), 1.3460 (S3)
- Resistance: 1.3620 (R1), 1.3684 (R2), 1.3784 (R3)
Other economic highlights
During the European morning, we expect the minutes of Riksbank last meeting to be released and they could shed some light regarding the bank’s decision to remain on hold, despite good economic data, as well as for any future path of rate hikes. Also, we get UK’s manufacturing and industrial output figures for November and later on the US crude oil inventories figures. As for speakers, Chicago Fed President Charles Evans, Dallas Fed President Robert Caplan, and St. Louis Fed President James Bullard will speak hopefully adding more info and opinions regarding the potential rate hike path of the Fed.
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