PM May Stands Firm, However Faces 2 Resignations
IronFX | Jul 09, 2018 06:16AM ET
- At the UK cabinet meeting on Friday PM Theresa May got the majority it required for a softer Brexit, marking a decisive win. However, later on UK’s key Brexit negotiator Davis and his deputy Baker resigned in protest for the new Brexit policy. The resignation could set a chain of events in motion that could lead up to a leadership contest in the Tory party. With time pressing for a Brexit deal any further negative headlines could weaken the pound.
- Cable, rose on Friday aiming for the 1.3330 (R1) resistance line. Technically it should be noted that the pair has an upward trend-line incepted since the 28th of June which is also supported by a rising RSI indicator approaching the reading of 70, in the 4 hour chart. Given the above, we retain our bullish bias on the pair but be advised that the pair may remain sensitive to any Brexit headlines. Should the bulls continue to be in charge we could see the pair breaking the 1.3330 (R1) resistance line and aim for the 1.3425 (R2) resistance area. On the other hand, should the bears take over we could see the pair dropping below the 1.3215 (S1) support line.
US Dollar weakens on soft data
- The US Dollar weakened against a number of its counterparts on Friday, as a softer than expected employment report was released. Despite there being a higher than expected NFP figure, the nonexistent acceleration of the Average Earnings growth rate, as well as the increase in the unemployment rate blurred the picture. The wages component, could have been the focal point once again and the lack of progress could imply weaker inflationary pressures. According to analysts, it should also be noted that the 10 year treasury yield dropped to one of its lowest levels for the past six weeks, causing the spread between the 10 year and the 2 year yield to flatten. We could see the sentiment for the USD being directed for a couple of days by the release.
- EUR/USD rose on Friday, breaking the 1.1715 (S1) resistance line (now turned to support). Technically it should be noted that the pair’s price action was supported by the upward trend-line incepted since the 28th of June, while the RSI indicator in the 4 hour chart has surpassed the reading of 70 in today’s Asian morning. Hence the bullish bias regarding the pair’s direction is currently upheld. Should the pair find fresh buying orders along its path we could see it trading above the 1.1820 (R1) resistance line. Should the pair come under selling interest we could see it breaking the 1.1715 (S1) support line and aim for the 1.1640 (S2) support barrier.
In today’s other economic highlights:
- In today’s European session, we get Germany’s Trade Balance figure for May. As for speakers, please note that ECB’s President Mario Draghi and Minneapolis Fed President Neel Kashkari speak.
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As fore the rest of the week:
- On Tuesday, we get China’s CPI rate for June, UK’s Manufacturing Output for May and Germany’s ZEW Economic sentiment indicator for July. On Wednesday, Japan’s corporate prices growth rate and BoC’s interest rate decision will be released. On Thursday, Germany’s final HICP for June and US inflation data also for June are due out. On Friday, we get China’s Trade Balance figure for June as well as the preliminary US U. Michigan Sentiment indicator for July.
GBP/USD
·Support: 1.3215(S1), 1.3125(S2), 1.3040(S3)
·Resistance: 1.3330(R1),1.3425(R2),1.3500(R3)
EUR/USD
·Support: 1.1715(S1), 1.1640(S2), 1.1550(S3)
·Resistance: 1.1820(R1), 1.1945(R2), 1.2070(R3)
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