Preparing For A New Brexit Vote
On Tuesday, March 12, 2019, the House of Commons may vote on terms of the UK’s exit from the European Union. Is there a possibility for a big EUR/GBP change?
Such dynamics indicate the weakening of the euro and the strengthening of the British pound. On March 11, 2019, European Commission President Jean-Claude Juncker and British Prime Minister Theresa May had telephone negotiations. According to their results, Juncker declared that “the ball is now in UK’s court”. Theoretically, the European Parliament can ratify the version of the agreement for which the British parliament should vote now. Let us recall that the UK’s exit from the EU is scheduled for March 29, 2019. If the parliament does not agree with Brexit without an agreement with the European Union, then the actual release date can be postponed for several months. On Monday, the pound strengthened by almost 1% against the US dollar, as investors believe that either the Brexit date will be postponed, or the UK will enter into an agreement with the EU. Let us note that on March 12, significant macroeconomic statistics for January will come out in the UK: GDP, trade balance, industrial production. In turn, the euro shows a noticeable weakening after the ECB meeting held last week. In September 2019, the European regulator is going to launch a new asset purchase program TLTRO-3, which will last until March 2021. The purchase of assets will be conducted through the money emission (following the example of the US QE programs). The ECB explained the easing of its monetary policy by low Eurozone GDP growth and low inflation.
On the daily timeframe, EUR/GBP: D1 has again fallen below the lower boundary of the long-term neutral range. Before that, it tried to breached it up and return to the neutral range. The price decrease and the continuation of the downtrend is possible in case of the approval of the Brexit plan by the British Parliament, as well as in case of the publication of positive macroeconomic data in the UK and negative - in the Eurozone. Otherwise, the price increase is not excluded.
The Parabolic Indicator gives a bullish signal. It can be used as an additional support level that should be breached down before opening a sell position.
The Bollinger bands have widened, which indicates high volatility.
The RSI indicator is near 50. It has formed a weak, positive divergence.
The MACD indicator gives a bearish signal.
In our opinion, an impulse movement can be formed after the price rises and overcomes the last fractal high and the resistance line of the downtrend at 0.868 or, in case it falls below the two fractal lows and the Parabolic signal at 0.852. Let the market choose the movement scenario itself. Two or more positions can be placed in a symmetrical way: after opening one of the orders, the second order can be deleted - the market has chosen a direction. After opening the pending order, we shall move the stop to the next fractal high (short position) or low (long position) every 4 hours following the Parabolic signal. More risk-averse traders may switch to the 4-hour chart after the trade and place there a stop loss moving it in the direction of the trade. Thus, we are changing the potential profit/loss to the breakeven point. If the price meets the stop level without reaching the order, we recommend to close the position: the market sustains internal changes that were not taken into account.
Position Sell
Sell stop Below 0.852
Stop loss Above 0.868
Position Buy
Buy stop Above 0.868
Stop loss Below 0.852
Market Overview
US stocks snap five-session losing streak
Dollar Weakens Despite Retail Sales Recovery
US stock market rebounded on Monday led by technology shares. The S&P 500 advanced 1.5% to 2783.30. Dow Jones Industrial Average gained 0.8% to 25650.88. The Nasdaq composite jumped 2% to 7558.06. The dollar weakening accelerated despite data showing above expected 0.2% rise over month in retail sales in January, after downwardly revised 1.6% drop in December: the live dollar index data show the ICE (NYSE:ICE) US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, fell 0.4% to 97.00 but is higher currently. Futures on US stock indexes point to higher openings today.
UK Parliament Votes On Brexit Deal Today
European stocks recovered on Monday led by bank shares. GBP/USD joined EUR/USD in climbing higher supported by news the UK and the European Union agreed to “legally binding changes” to overcome a roadblock in the Brexit deal with both pairs retreating currently. The Stoxx Europe 600 index rose 0.8%. The DAX 30 gained 0.8% to 11543.48. France’s CAC 40 rose 0.7% and UK’s FTSE 100 added 0.4% to 7130.62.
The “legally binding changes” in the Brexit deal are about the mechanism in the deal designed to keep an open border between Britain’s Northern Ireland and EU member Ireland. The mechanism, known as the backstop, is designed as a way to keep the UK in a customs union with the EU until a permanent new trading relationship is established. Today UK parliament votes on the newly amended Brexit plan to leave the EU. The first vote on Brexit deal rejected it in January. Brexit supporters are concerned the backstop could be used to bind the country to EU regulations indefinitely. At a joint news conference with May European Commission President Jean-Claude Juncker warned British lawmakers “it is this deal or Brexit might not happen at all” and “there will be no new negotiations.” In case of another “no” vote, UK lawmakers will vote over the following two days on whether to leave the EU without an agreement, which is likely to be rejected, or to ask the EU to delay Brexit beyond the scheduled March 29 departure date.
Nikkei Leads Asian Indices Rally
Asian stock indices are extending gains today. Nikkei jumped 1.8% to 21503.69 helped by resumed yen slide against the dollar. Markets in China are higher: the Shanghai Composite Index is up 0.9% and Hong Kong’s Hang Seng Index is 1.3% higher. Australia’s All Ordinaries Index however extended losses 0.1% despite the Australian dollar resumed sliding against the greenback.
Brent Up
Brent futures prices are extending gains today still supported by OPEC supply cuts. Prices rallied yesterday after reports Saudi Arabia planned to reduce its crude exports to support prices: May Brent crude rose 1.3% to $66.58 a barrel on Monday.