The pound took a hit on Monday with 0.70% against the Euro and 0.80% against the dollar. The latest Brexit headlines were the key driver to the pound as UK PM Boris Johnson threatens to walk away from UK-EU trade talks if no agreement is placed before October 15. It seems the UK and European Union shifted to the top gear for the latest round of Brexit trade talks on Tuesday. This is the eight rounds of negotiation, and these talks were going quite some time. With October 15 is only 4-weeks near and we sense that we are getting closer to resolution.
BBC reported The UK’s chief Brexit negotiator has said the government is not “scared” of walking away from talks without a trade deal ready to come into force in 2021.
Tapas Strickland at NAB says, “The key question for markets is whether the remarks are still mostly brinkmanship as negotiations near the finish line; the mild market reaction suggests markets think so and still sniff a deal.”
ING: The main divisive point remains state aid, and we don’t expect the UK to present an acceptable proposal for the EU next week. The October deadline for trade negotiations looks likely to be breached, and with no imminent breakthrough in negotiations, the negative headline news is likely to increase.
The UK Manufacturing PMI rose to a 30-month high of 55.2 in August vs. 53.3 in July-30 month high.
Rob Dobson, Director at IHS Markit, compiles the survey: “The recovery of the UK manufacturing sector gathered pace in August. Output expanded at the fastest rate in over six years as new work intakes rose to the greatest extent since November 2017, led by an upturn in domestic demand and signs of recovering exports. Business optimism also remained encouragingly robust and close to July’s recent peak”.
Data preview: We will see UK Final GDP figures on Friday.
Projections are for UK July GDP to slow its growth pace to 6.7% annualized, compared to 8.7% in June.
ING: July GDP (Friday) should point to an economic rebound of 6-7% during the month as many lockdown measures were eased. Still, with the UK economic outlook highly uncertainty (both on the COVID and UK-EU trade negotiation fronts), the bias remains for eventually even looser BoE monetary policy (likely in November).
Following the colossal rejection of 0.9175 in EUR, we are now finally retested to the major support level. The parallel support level at 0.8860 offers a decent bounce, and if you are bullish EUR, then this is the place to take long with a bounce back to 0.9070 and 0.9100.
Now the price is exhibiting a bullish bias where it is likely to advance from current levels. The daily RSI is in an upward trajectory, and the oscillator has turned bullish crossover. Considering these facts, traders can initiate fresh long positions with a stop-loss below 0.8860.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
What is your Technical View?
Do you have a different idea? Please leave us a comment and get an answer from our professional analysts