Theresa May came under “friendly” fire yesterday as a group of 62 Tory Parliament members signed a letter demanding a clear Brexit. The group amounts enough members to trigger a leadership bid against May within the Conservative party. The timing of the letter is also crucial as the UK cabinet is to retreat to the countryside in order to reach Brexit decisions tomorrow. Further uncertainty regarding Brexit and the inner political stage could undermine the GBP in the short term. Cable, traded in a sideways manner the past few days below the 1.4040 (R1) resistance level. The UK employment data, as well as the Inflation report hearing, could subdue any possible negative Brexit headlines at least for today and support the pound, however, the US financial data and especially the FOMC January meeting minutes could support the USD. We see the case for the pair to continue in a sideways manner in the short term, however, some bullish tones could be expected for the pair. For our view to change to the negative, we would require a clear break of the upward trend-line incepted since the 11th of January and tested on the 9th and 14th of February. Should the pair find buying orders along its path, we could see it breaking the 1.4040 (R1) resistance line and aim for the 1.4168 (R2) resistance hurdle. Should the pair come under selling interest, we could see it breaking the prementioned upward trend-line and the 1.3850 (S1) support line.
- Support: 1.3850(S1), 1.3750(S2), 1.3615(S3)
- Resistance: 1.4040(R1), 1.4168(R2), 1.4325(R3)
The EU Commission has expressed its concern about possible US measures to curb imports of steel and aluminum. German officials stated that “We must first wait and see” however also clearly stated that the EU will respond accordingly should the US proceed with tariffs or import curbs. On other news, Japan’s steel industry stated that US Commerce Department proposal to President Trump violates the principles of free trade. Should there be further headline escalation of a possible trade war we could see JPY and EUR weakening in the short term. EUR/USD as analysed yesterday traded in a sideways manner with a bearish mood, breaking the 1.2355 (R1) support level (now turned to resistance). We see the case for the pair to continue to trade in that manner as both, fundamentals and technicals seem to converge in that direction. On the technical side, we would like to point out that the pair is currently testing once more the upward trend line incepted since the 18th of December. Should the bulls take the driver’s seat we could see the pair breaking the 1.2355 (R1) resistance level and aim for the 1.2455 (R2) resistance hurdle. On the other hand, should the bears have the upper hand on the market, the pair may break the prementioned upward trend line and the 1.2230 (S1) support line and aim for the 1.2100 support barrier.
- Support: 1.2230(S1), 1.2100(S2), 1.1920(S3)
- Resistance: 1.2355(R1), 1.2455(R2), 1.2600(R3)
In today’s other economic events:
During European morning we get Germany’s, France’s and Eurozone’s preliminary PMI’s for February, all dropping slightly and could weaken the EUR somewhat. Later on, we get the UK employment data which could support the GBP. Please bear advised for the upcoming Inflation Report hearing in the UK and any possible mentioning of more future rate hikes by Bank of England could also support the GBP. In the American session, we get the US preliminary Manufacturing PMI for February and the US existing home sales for January. Last but not least, the January FOMC meeting minutes will be released and any hawkish tone in their content could support the USD.
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