Brexit Deal Wins, But Johnson’s Timetable Loses

The British currency was once again in the financial world’s front seat yesterday, ending as the main loser among the G10 currencies. It initially gained after the UK Parliament voted in favor of UK PM Johnson’s Brexit deal, but was quick to reverse south as MPs rejected his legislation timetable. The broader market sentiment was also hurt, with all three US indices, and most of the Asian ones today, closing their session in the red.

Pound the Main Loser as UK MPs Reject Johnson’s Brexit Timetable

And the show goes on. For another day, it was all about Brexit, Brexit and… Brexit. Yesterday, the UK Parliament held two votes related to the deal agreed between the UK PM Johnson and the EU. Initially, lawmakers passed the second reading of the Brexit deal, but then, they rejected Johnson’s timetable to rush legislation in just three days, something that led the government say that it would halt the process. All this means that the UK is unlikely to be able to complete its exit from the EU by October 31 st, the current Brexit deadline.

The pound edged north after the first vote, but hit resistance near the psychological zone of 1.3000 against its US counterpart and after the second vote, it tumbled to underperform every other G10 currency. Where it may be headed next still remains largely a mystery. With the clock ticking towards October 31 st, it is still unknown when, how and even whether the UK will separate paths with the EU.

Now, the ball is on the EU’s court. Will they grant a new extension? Remember that on Saturday, forced by law, UK PM Boris Johnson sent a delay-request letter, but unsinged and accompanied by another letter — this one signed — arguing against any delay. EU Council President Donald Tusk said yesterday that the remaining 27 EU members should support a delay towards the end of January, adding to signs that a disorderly exit next Tuesday could still be averted. That said, with France saying that it is willing to grant only a few more days, and not a longer extension, we cannot say for sure that EU member states will reach consensus.

Apart from the pound, yesterday’s developments had an impact on the broader market sentiment as well. While most major EU indices closed in positive territory (the exception was Spain’s IBEX 35, which closed 0.24% down), all three of the US indices traded in the red. The S&P 500 and the DJIA slid 0.36% and 0.15% respectively, while Nasdaq fell 0.72%. Today, most Asian indices finished lower as well. Although Japan’s Nikkei gained 0.34%, China’s Shanghai Composite lost 0.43%.

GBP/AUD — Technical Outlook

A drop below its key support area, at 1.8715, which is marked by the high of October 14 thand the low of October 17 th, could clear the path for a further slide, potentially targeting another strong support zone, roughly between the 1.8495 and 1.8520 levels. That zone might provide some good support initially, from which GBP/AUD could rebound back up a bit. That said, if the rate stays below the 1.8715 hurdle, we may see another round of selling, possibly leading the pair again to the area between 1.8495 and 1.8520, a break of which could push the rate slightly lower, to test the 1.8430 mark, which is near the highs of October 3 rdand 10 th. This is also where GBP/AUD could end up testing the 200 EMA on the 4-hour chart, which may provide some additional support.

Alternatively, a break of the aforementioned downside line and a rate-push above the 1.8935 barrier, marked near the highs of Monday and Tuesday, could attract more bulls into the field and GBP/AUD might drift higher again. This is when we will aim for the current highest point of this year again, at 1.9093, a break of which could send the rate to the 1.9231 level. That level is marked by the high of April 27 th, 2016.

GBP/JPY — Technical Outlook

A drop below the 138.38 hurdle, which marked by an intraday swing low of October 16 th, could send the pair to the 137.47 obstacle, a break of which may force the pair to test the 136.45 area, marked near the low of October 15 th. If the pair stalls around there, it might even correct back up a bit. That said, if GBP/JPY stays below the 138.38 zone, this could lead to another round of selling, as the bears may see it as a good opportunity to step in again and take advantage of the higher rate. Another slide could bring the pair to the 136.45 area again, a break of which might clear the way to the 135.50 level, marked near the low of October 14 th.

On the upside, we will only get comfortable with higher areas if we see a push above the high of last week, at 141.50. This way the pair would confirm a forthcoming higher high, which might attract more buyers into the game. The rate could then accelerate to the 142.87 obstacle, a break of which might set the stage for a test of the 143.77 level, marked by the low of April 25 th.

As for Today’s Events

As for tonight, during the Asian morning Thursday, we get Australia’s and Japan’s preliminary manufacturing and services PMIs for October. The Australian indices are expected to have declined to 49.0 and 52.2, from 50.3 and 52.4 respectively, while no forecasts are available for the Japanese ones. The BoJ’s own core CPI for September is also coming out, but no consensus is available for this release either.


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Originally published at on October 23, 2019.



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