According to the media, China has canceled the trade negotiations with the US, which were about to start this week. Main reasons cited, were the new round of tariffs as well as a US decision to sanction a Chinese military agency. China seems to have summoned the US ambassador in Beijing and postponed military talks in protest. Differences between the two sides seem to be wide on key issues, hence further escalation is possible. USD/JPY dropped briefly on the news however corrected later on and should there be a further escalation, we could see volatility rising.
USD/JPY continued to trade in a bullish market on Friday, testing the 112.80 (R1) resistance line. Technically, it should be noted that the upward trend-line, incepted since the 7th of September remained intact, hence we maintain our bullish bias. Should the pair’s direction continue to be dictated by the bulls, we could see the pair breaking the 112.80 (R1) resistance line and aim for the 113.60 (R2) resistance level. Should the bears take over, we could see the pair breaking the prementioned upward trend-line and aim if not break the 112.05 (S1) support line.
- Support: 112.05 (S1), 111.30 (S2), 110.75 (S3)
- Resistance: 112.80 (R1), 113.60 (R2), 114.75 (R3)
GBP drops on Brexit fears
The pound dropped heavily on Friday, as Brexit fears intensified after EU leaders rejected UK’s plan for Brexit. UK’s PM Theresa May stated, that the EU must supply an alternative Brexit proposal as EU leaders have rejected her plan without a clear and full explanation. EU leaders stated, that Theresa May needed to retreat from her positions on trade and arrangements for the Irish border issue. Tough talks could be expected from both sides, as the Brexit date draws near and should there be further negative headlines about Brexit, we could see the pound weakening further. Volatility could also arise, as tensions about Brexit could be elevated within the UK political scene, as the Tory party is about to have its annual conference at the end of the month.
GBP/USD dropped heavily on Friday, breaking consecutively the 1.3215 (R3), 1.3150 (R2) and the 1.3080 (R1) support levels, now turned to resistance. The pair stabilised during today’s Asian session around the 1.3080 (R1) resistance line, trying to decide the direction of its next leg, however further negative headlines about Brexit could weaken the pair and vice versa. Should the pair continue to be underselling interest we could see it breaking the 1.3030 (S1) support line and aim for the 1.2965 (S2) support barrier. Should, on the other hand, the market favor the pair’s long positions, we could see it breaking the 1.3080 (R1) resistance line and aim for the 1.3150 (R2) resistance hurdle.
- Support: 1.3030 (S1), 1.2965 (S2), 1.2895 (S3)
- Resistance: 1.3080 (R1), 1.3150 (R2), 1.3215 (R3)
In today’s other economic highlights:
On a rather quiet Monday, in the European session, we get from Germany the Ifo business climate indicator for September. Please be advised that gold prices dropped heavily on Friday and should you be interested in further analysis and news regarding the bullion, please refer to our Gold weekly outlook later today.
As for the rest of the week:
Read our weekly outlook for a full analysis, but to quickly summarise: On Tuesday, we get from the US the CB consumer confidence indicator for September. On Wednesday, from the Czech Republic the CNB interest rate decision, and from the US the FOMC’s interest rate decision. On Thursday, from New Zealand, RBNZ’s interest rate decision, from Germany the preliminary HICP rate for September and from the US the final GDP growth rate for Q2. On Friday, from France and the Eurozone the preliminary HICP rate for September, from Germany the Unemployment Data for September, from the UK the final GDP growth rate for Q2, from Canada the GDP growth rate for July and from the US the U.Michigan Consumer Sentiment indicator for September.
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