Media suggested yesterday that Mexican officials expressed concerns about US intentions to impose tariffs on steel. The main concern stems from Mexico being a major importer of steel and possible tariffs could lead to a rise in steel prices. On the bright side, it could be the case that a progress albeit slow has been made on the origin issue, in the NAFTA negotiations. Canadian officials, also confirmed that some advances have been made by mentioning a “reasonably good progress”. Should there be further positive headlines about the NAFTA negotiations USD, CAD and MXN could rise. USD/CAD continued to rise yesterday breaking the 1.2800(S1) resistance line (now turned to support). We see the case for the pair to stabilise and continue to trade in a sideways manner in the next couple of days, albeit some bullish tones may continue to exist along with some downwards corrections. Fundamentally headlines about the NAFTA negotiations, the ISM Manufacturing PMI release, Jerome Powell’s testimony before the Senate’s Banking Committee and Canada’s GDP release tomorrow may influence the pair’s direction. On the technical side, we see a rather strong resistance level at 1.2910(R1) which was tested a number of times in the past six months and had not been broken yet, setting a barrier for the pair. Also, an upward trend line, incepted since the 2nd of February supports the argument as well as the crossing of the 100 moving average over the 200 moving average on the 21st of February, may be signaling a rising of the pair’s prices. On the other hand, the strong reading of the RSI above 70, may imply a possibly overcrowded long position. Should the pair find fresh buying orders, we could see it breaking the 1.2910(R1) resistance line. On the other hand, should the pair come under selling interest, we could see it breaking the 1.2800(S1) support level and aim for the 1.2610(S2) support hurdle. Political analysts are pointing out that hard Brexit probabilities just rose. Most probably the UK political stage will be put to the test, as Theresa May, may be forced to choose clearly sides. Any choice made could bear considerable risks and political costs for the Prime Minister. The pound reacted negatively to the news and any further negative Brexit headlines could continue to weaken the pound.
- Support: 1.2800(S1), 1.2610(S2), 1.2450(S3)
- Resistance: 1.2910(R1), 1.3080(R2), 1.3200(R3)
Theresa May rejects the EU draft deal
Theresa May rejected in a quite strong language the EU Brexit Draft Deal yesterday. Disagreements seem to concentrate on the Irish borders puzzle, as well as the customs union issue currently. Phrases like “No UK Prime Minister could ever agree to it” and “We will never do so” underscored her determination. Political analysts are pointing out that hard Brexit probabilities just rose. Most probably the UK political stage will be put to the test, as Theresa May, may be forced to choose clearly sides sooner than later. Any choice made could bear considerable risks and political costs for the Prime Minister. The pound reacted negatively to the news and any further negative Brexit headlines could continue to weaken the pound. Cable dropped yesterday, breaking the 1.3850(R1) support line, now turned to resistance as well as the upward trend line incepted since the 13th of January. We could see cable trading in a bearish mood in the next few days. The fundamental’s behind the pair could weaken of the pound, as negative Brexit headlines may continue to appear and Powell’s testimony before the Senate could support the USD. Should the bears have the upper hand we could see the pair continue to drive south, breaking the 1.3750(S1) support line and aiming for the 1.3615(S2) support zone. On the other hand, should the bulls take the reins we could see the pair breaking the 1.3850(R1) resistance level.
- Support: 1.3750(S1), 1.3615(S2), 1.3500(S3)
- Resistance: 1.3850(R1), 1.4040(R2), 1.4168(R3)
Today’s other economic highlights:
In the European session, from the UK we get the Nationwide House Price Index for February, from France, Germany, and the Eurozone we get the final Manufacturing PMI’s for February, from the UK the Manufacturing PMI also for February and from the Eurozone the Unemployment rate for January. In the North American session, we get the US core PCE prices for January and the US ISM Manufacturing PMI for February.
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