Brexit on the Foreground
- Uncertainty increases about the Brexit and that’s due mainly to two factors. At first, on Wednesday the UK parliament decided that any implementation of Brexit deals in the UK, requires parliamentary approval. Despite optimism that the new law should not be an obstacle in substantive future negotiations with the EU, British PM May will have to negotiate in two fronts now and maneuverability could be lessened. Most European counterparts considered this as an internal UK issue, however there were also EU officials, which stated that once a subject is agreed upon there cannot be a renegotiation of the subject, in case it does not pass in the UK Parliament. The second factor which adds to uncertainty is that negotiations are expected to pass to the next level were issues, such as trade, are more complicated. EU’s unity until now was taken for granted, however that may no longer be the case as matters get more complicated and different positions from different member states could emerge on certain subjects.
- Cable rose yesterday Wednesday, during the Asian morning and tested the 1.3455 (R1) resistance barrier but came under selling interest upon release of BoE’s interest rate decision and continued to trade at slightly lower levels. We see the case for the pair to continue to trade in a sideways manner should there be no surprises. In case the bulls take the driver’s seat we expect the pair to break the resistance level of 1.3455 (R1) and aim for the 1.3520 (R2) resistance barrier. Should the bears take the reins, the pair could break the 1.3400 (S1) support level and aim for the 1.3365 (S2) support hurdle.
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US becoming nervous about tax overhaul
- Media reports suggested that Republicans are in a hurry to vote for the tax bill, before new elected Alabama Senator Dough Jones is seated. However that is only one of the republican’s worries. Possible republican rebels, could overturn the existing slim majority of two votes which the Republican Party currently enjoys about the tax overhaul. Main topics of debate within the Republican Party the increase of deficit and tax cuts for higher earnings as well as corporations. Despite the fact that President Trump stated, that the middle class is to benefit from the tax plan, it still remains unpopular according to various polls, hence there is a broader audience for any dissentient voices. Also uncertainty increases in the US political stage as an old subject seems to reemerge as the Federal Communications Committee re-appeals Net Neutrality rules.
- EUR/USD dropped during the ECB press conference yesterday Thursday and broke the 1.820 (R1) support level (now turned to resistance) and continued to trade at lower levels during the Asian morning today. We continue to have the opinion that should there be no further surprises in the fundamentals behind the EUR/USD the pair will continue to trade in a sideways direction. Should the bulls take the reins we could see the pair break the 1.1820 (R1) resistance barrier again and aim for the 1.1880 (R2) resistance hurdle. Should the bears take the driver’s seat we could see the pair breaking the 1.1725 (S1) support level and aim for the 1.1680 (S2) support zone
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As for today’s other economic data
- From the Eurozone we get the trade balance for October
- From Canada we get the Manufacturing Sales for October
- From the US the NY Empire State manufacturing index is to be released and later on we get the US Industrial production for November, which is expected to have a substantial slowdown.
Support: 1.1725 (S1), 1.1680 (S2), 1.1550 (S3)
Resistance: 1.1820 (R1), 1.1880 (R2), 1.1960 (R3)
Support: 1.3400 (S1), 1.3365 (S2), 1.3300 (S3)
Resistance: 1.3455 (R1), 1.3520 (R2), 1.3550 (R3)