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Sterling Gaps Up as Brexit Talks Go an Extra Mile, But Upside Capped

Sterling opens broadly higher as Brexit trade negotiation is extending through the Sunday deadline. The Pound is taking Euro and Swiss Franc slightly higher today. Nevertheless, it should be noted that no important resistance level is broken by Sterling. Traders are just lighting their shorts. Markets are rather mixed elsewhere, with weakness seen in Dollar. But overall trading is subdued, with most pairs bounded inside Friday’s range.

Technically, other than Sterling pairs, Euro is worth a watch this week too. Both EUR/USD and EUR/JPY are holding in tight range below 1.2177 and 126.74 temporary tops. Outlook stay bullish in both pairs and upside breakout could be imminent, considering the time spent on the consolidations. However, Euro is at the same time capped by weakness against commodity currencies. EUR/AUD is pressing 1.6033 low and firm break there could prompt downside acceleration. Such development could also drag EUR/CAD further lower to retest 1.5313 low. We could see which way it goes later in the week.

In Asia, currently, Nikkei is up 0.64%. Hong Kong HSI is down -0.04%. China Shanghai SSE is up 0.39%. Singapore Strait Times is up 1.39%. Japan 10-year JGB yield is up 0.004 at 0.017.

UK and EU to go the extra mile in Brexit talks, GBP/CHF and EUR/GBP gapped but range bound

UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen  agreed to “go the extra mile” and extend the Brexit trade negotiations beyond Sunday’s deadline. “Despite the exhaustion after almost a year of negotiations, despite the fact that deadlines have been missed over and over, we think it is responsible at this point to go the extra mile,” they said in a joint statement. “We have accordingly mandated our negotiators to continue the talks and to see whether an agreement can even at this late stage be reached,” they added. UK delegation are expected to stay in Brussels until at least Tuesday.

GBP/CHF opens notably higher today but it’s kept well below 55 day EMA, staying on the lower half of the medium term range. Bias is turned neutral for now. We’d maintain that firm break of 1.2203 resistance is needed to confirm underlying bullish development in the cross. Meanwhile, firm break of 1.1598 support is needed to confirm bearish development, probably due to confirmation of no-deal Brexit. Otherwise, we’ll just wait-and see what’s next.

Similarly, EUR/GBP opens lower but it’s held well above 55 day EMA, in the upper side of recent range. Break of 0.8861 support is needed to confirm completion of the choppy rebound from 0.8670. Otherwise, another rise through 0.9229 and 0.9291 resistance zone is expected, at a later stage.<