The Brexit Developments Continue. Unemployment Increase in Australia
The cross-party talks between the Conservatives and Labour continued this week. Theresa May is trying to find common grounds with the opposition, but it is a hard task to do, as Labour still disagrees with the proposed deal. One of their arguments now is that Labour finds it difficult negotiate with the government, which is struggling to even agree on matters within its own party. But all this looks like a closed circle, where Mrs May is pushed around in, and it is unlikely that the outcome could be in her favour.
Even if the WAB passes through Parliament, it would also be possible to include an amendment, which would force the UK to go back to the EU’s negotiations table and request certain changes to the Withdrawal Agreement if necessary. The question here is how well that would go with the EU itself, this remains unknown. Most likely, this wouldn’t go down very well, as the EU have already stated that the agreed deal is non-negotiable. If then, the UK is not able to get things their way, the Brexit process could stall once again. The government would have to seek alternatives and other methods of finding common grounds with MPs. Which is basically, what has been happening till now. In general, if the EU refuses to renegotiate the deal, Britain is left roughly with these options:
- To leave without a deal
- To hold a General election
- Vote of no confidence
- A new referendum
- Or to cancel Brexit
EUR/GBP — Technical Outlook
A further push higher might overshoot the yesterday’s high and test the 0.8740 barrier, which previously acted as a good area of support on February 8 th, 13 th, 17 thand 18 th. This time the area could take the role of resistance and the rate might get a hold-up around there, or even retrace back down a bit. The pair could slide back to the upside support line for a quick test, but if EUR/GBP fails to break below it, this is when the bulls might take advantage of the lower rate and push it up again. This is when the pair could try and bypass the 0.8740 obstacle, potentially targeting the 0.8763 zone, marked by the high of February 19 th.
Alternatively, in order to consider a possible change of trend, at leas in the short run, we would like to see a break of the aforementioned upside support line and a rate-drop below the 0.8691 hurdle, marked by Tuesday’s high. This way, EUR/GBP could then fall to the 0.8668 obstacle, a break of which might allow more bears to join in and drive the pair even lower. The next potential target could be the 0.8650 level, marked by the highs of April 29 thand May 9 th.
AUD/USD — Technical Outlook
On the other hand, if AUD/USD suddenly breaks that downside resistance line and remains trading above it, this could increase the pair’s chances to continue moving in the upwards direction. But, for a better confirmation, we would like to see a clear break above the 0.6962 barrier, marked by the lows of May 6 thand 9 th. Such a move might open the door to a large move higher, where the next possible resistance area could be seen around the 0.6985 obstacle, a break of which might send the pair further in the upwards direction. This is when we will target the area around the 0.7025 level, marked near the high of May 8 th.
As for the rest of today’s events
During the early hours of the Asian morning, Australia released its employment figures for the month of April. The expectation was that the number for the amount of unemployed people could be at 5.0%, but it came out with a slight disappointment, at 5.2%. The AUD did react to the news with a push lower, but then quickly after that it recovered some of those losses.
Also, the economic calendar shows that we get Eurozone’s trade balance for March, while from the US, we have building permits and housing starts for April. The Euro area trade surplus is expected to have increased to EUR +19.9bn from EUR +17.9bn, while both the US building permits and housing starts are expected to have increased after sliding in March.
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Originally published at https://www.jfdbank.com on May 16, 2019.