May Wins Confidence Vote, Huawei Reports Weigh on Risk Sentiment

Pound Stays Strong After May Wins Confidence Vote

The pound traded higher against all but one of the other G10 currencies, with the dollar being the only one to resist, thereby keeping Cable virtually unchanged. The main losers were NZD, AUD and JPY in that order.

EUR/GBP — Technical Outlook

This week, EUR/GBP has been trading south, as from the two currencies, the euro seems to be the weaker one. Last Friday, the pair exited the range, that it was trading in recently, through the lower bound of it, signalling the beginning of a small downtrend that could last for a while. The intraday spike up that we saw on Tuesday was driven by the UK Parliament vote, after which, the pair quickly resumed its drift lower. Such activity formed a short-term downside resistance line, drawn from the high of the 11thof January, which we will keep a close eye on. Looking at our oscillators, both are suggesting that the pair has now bottomed, but until they start firmly pointing higher, we will continue examining the downside.

Will Huawei’s Investigation Affect US-China Trade Talks?

Outside the Brexit land, the financial community continued trading in a somewhat risk-on mood. Although Aussie and Kiwi were the main losers among the major currencies yesterday, major EU and US indices ended their trading mostly in the green. The exception was UK’s FTSE 100, which closed 0.47% down. This may be due to the pound’s strength. Many companies of the index generate profits in other currencies, for example dollars. So, when the pound strengthens, these profits worth less in terms of pounds.

DAX — Technical Outlook

Since the end of December 2018, DAX had been on a gradual move higher, above a short-term upside support line. That said, from the middle of last week, the index started moving sideways, trading between the 10785 and 10950 levels. Overall, DAX also remains below its medium-term downside resistance line, taken from the end of September last year. For now, we will stay neutral and wait for the index to get out of the above-mentioned range and to break either the upside or the downside line.

As for Today’s Events

During the European session, we get Eurozone’s final inflation data for December and as usual, the final prints are expected to confirm their preliminary estimates. Specifically, they are expected to confirm that headline inflation slowed to +1.6% yoy from +1.9%, and that the core rate remained unchanged at 1.0%.

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