On Monday, Britain and the European Union reached an agreement for a transition period after Brexit. The pound strengthened on confirmation that Britain will continue to be part of the European Union for 21 months until the end of 2020. Under the transition deal, the U.K. will continue implementing EU rules until the end of 2020. However, the problem with the Irish border remains unsolved. The Republic of Ireland, an EU member state and the UK including Northern Ireland, do not seem to agree. This may create further inside pressures in N. Ireland as the outcome seems to be unsettled. Any further positive headlines could support the GBP and vice versa. GBP/USD jumped yesterday on the news, breaking the 1.4040 (R1) resistance level, however, it later subdued somewhat and traded slightly below it. We see the case for the pair to trade in a sideways manner for the next couple of days with a bearish mood as the financial data due out today, could weaken the sterling. On the other hand, the FOMC interest rate decision due out on Wednesday could support the USD. Should the bears take the reins, we could see the pair breaking the 1.3915 (S1) support level. If the bulls have the upper hand we could see the pair breaking the 1.4040 (R1) resistance line again and aim for the 1.4168 (R2) resistance hurdle.
- Support: 1.3915 (S1), 1.3775(S2), 1.3620(S3)
- Resistance: 1.4040(R1), 1.4168(R2), 1.4345(R3)
The G20 meeting kicked off yesterday
The G20 meeting kicked off yesterday at Buenos Aires with main issues being trade, protectionism, and cryptocurrencies. Europe and other participants seem to urge for a continuance of free trade while the US seems to set national interests first. The U.S. import tariffs of 25 percent on steel and 10 percent on aluminum, set to become effective on March 23 seem to dominate discussions. The G-20 could be a turning point for the crypto-market as investors call for a globally coordinated approach to govern it. In 2018 a series of regulatory restrictions and negative advertising have kept cryptocurrencies in a bearish mood. However, BoE’s Mark Carney stated yesterday that cryptocurrencies are currently too small of an asset class to pose systemic risks to the financial system providing a positive note. EUR/USD strengthened yesterday, testing but not breaking the 1.2355 (R1) resistance line. We see the case for the pair to trade in a sideways movement with some bearish tones today, as financial data due out today could weaken the EUR. Should the pair find fresh buying orders along its path, we could see it breaking the 1.2355 (R1) resistance line and aim for the 1.2495 (R2) resistance hurdle. On the other hand, should the pair come under selling interest, we could see it aiming for or even reaching the 1.2230 (S1) support line.
In today’s other economic highlights:
In the European session, we get Germanys PPI rate for February, the ZEW economic sentiment and Current Conditions indicators for March, as well as Eurozone’s Preliminary Consumer Confidence indicator for March. All the above rates and indicators could weaken the EUR. We also get UK’s Inflation data for February which are forecasted to slow down and could weaken the sterling. From New Zealand, we get the milk auction data for the current week.
All trading involves risk. It is possible to lose all your capital
This information is not considered as investment advice or investment recommendation but instead a marketing communication. This material has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.