The UK expelled 23 Russian diplomats as a response to an action of spy poisoning, allegedly by Russian intelligence forces. There was an angry response from Russia which had in the near past denied all allegations. However, we see the case for Russia to be more focused on the upcoming elections and the reactions albeit strong could be limited. Tension seems to rise currently, as the US had a firm stance on the matter supporting the UK, while on the other hand, the EU supported the UK however with a softer announcement. It was indicative that the reappointed German Chancellor Merkel more or less stated that the EU should have a united reaction on the issue, however, it should also continue to have a dialogue window open with Moscow. We could see trade relationships between the UK and Russia deteriorate should the situation escalate any further. Further negative headlines could weaken the GBP and maybe the EUR should the escalation also include the EU. GBP/USD moved in a sideways manner yesterday trading well between the 1.3915 (S1) support line and the 1.4040 (R1) resistance line. We see the case for the pair to continue to trade in a sideways manner today, with some bullish tones as the USD side could weaken from financial data due to be released later in the day. Should the bulls have the upper hand we could see the pair breaking the 1.4040 (R1) resistance level and aim for the 1.4168 (R2) resistance level. On the other hand, should the bears take the reins we could see cable breaking the 1.3915 (S1) support line and aim for the 1.3775 (S2) support level.
- Support: 1.3915(S1), 1.3775(S2), 1.3620(S3)
- Resistance: 1.4040(R1), 1.4168(R2), 1.4345(R3)
Italian parties have started to move in order to achieve alliances which would enable them to rule the country. Media suggested yesterday, that the Northern League is open to negotiations with the 5 Star Movement. Despite the possibility of the coalition actually coming to shape, being remote, the stakes for the Eurozone would be very high, as the two radical movements could shake the political scene in the EU should they come to power. Both parties are strongly anti-migrant, skeptical about the EUR and both have supported the possibility of increasing the fiscal deficit, implying further national debt and a possible renegotiation of Eurozone’s fiscal rules. We see the case for any further headlines about a possible League-5SM coalition weakening the EUR as uncertainty could rise. EUR/USD traded in a sideways manner yesterday testing the 1.2355 (S1) support line. The pair could continue to trade in a sideways manner for the next couple of days, again with some bullish tones. Should the pair come under buying interest we could see it breaking the 1.2495 (R1) resistance level. On the other hand, should it come under selling interest we could see the pair breaking the 1.2355 (S1) support line and aim for the 1.2230 (S2) support barrier.
- Support: 1.2355(S1), 1.2230(S2), 1.2100(S3)
- Resistance: 1.2495(R1), 1.2680(R2), 1.2885(R3)
As for today’s other economic highlights:
In the European session, from France, we get the final CPI (EU Norm.) rate for February and from Switzerland SNB’s interest rate decision. The bank is expected to remain on hold at -0.75% and CHF OIS imply that the market has priced in such a scenario by 96.32%. Also in the European day, we get Norge Bank’s interest rate decision which is also expected to remain on hold at a +0.50% deposit rate. In the North American session we get the Philly Fed Business Index for March and from Canada, we get the ADP Non-Farm Employment Change for February. As for speakers, ECB’s Sabine Lautenschlaeger speaks.
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