The Withdrawal Agreement Bill Is In Focus

The Brexit uncertainty continues. Today, the UK Parliament should vote on the Withdrawal Agreement Bill, where Boris Johnson will try to make his agreement made with the EU last week — a law.

Yesterday, the spotlight fell on the Brexit developments again, as the Brexit saga continued. Boris Johnson sent his unsigned letter, requesting an extension for UK’s exit from the European Union. The reason that it was unsigned, is because, in general, the UK’s Prime Minister opposed the whole matter of requesting an extension, but was bound by the law to do so. As we know, the Parliament voted on Saturday to seek an extension from the EU, which made Mr Johnson very unhappy. There were a lot of speculation over will he eventually send the letter to the EU, or not. In addition to the unsigned letter, Boris Johnson sent another letter to the EU Council President Donald Tusk, where he expressed his concern over the possible Brexit deadline extension and its potential negative effect on the interests of both sides. Certainly, such a move did not go well with the UK’s opposition. Also, yesterday, the UK Parliament speaker, John Bercow, rejected the motion to debate and the vote on the Brexit deal again, as quote: “Today’s motion is in substance the same as the Saturday’s motion. Today’s circumstances are in substance the same as Saturday’s circumstances”. He explained it by saying that “…it would be repetitive and disorderly and disorderly to do so”.

The government critics are saying that Boris Johnson is not allowing enough time for everyone to examine the deal in more detail and that he is just trying to rush the deal through. The government released the withdrawal agreement details late on Monday, which should now be reviewed carefully by the MPs. Meanwhile, on the continent, some EU leaders are seriously considering the option of granting the UK a, quote: “short, technical extension” if Britain continues having problems of ratifying the deal. That said, all the 27 member states would have to vote if they agree with that, or not. Although there are some EU leaders, who strongly oppose such a move, like France’s Emmanuel Macron, in our view, it would still be difficult for him to go against Brussels and Germany, if the last two would be more lenient. So far, no official response came from the EU in regards to Johnson’s letter.

As for today’s Brexit developments, the schedule states that there will be a vote in the UK Parliament, at 19:00 UK time, on making Boris Johnson’s deal — a law. This will be a vote on the so-called WAB (Withdrawal Agreement Bill), which if gets the majority of the votes today, could give legal effect on Johnson’s deal, negotiated with the EU in the end of last week.

As for the British currency, yesterday, after Bercow rejected the motion on Johnson’s agreement, the pound took a small dive, but was quick to recover after that. If today’s bill passes, GBP might initially strengthen on the hopes that there is some sort of light in the end of the Brexit tunnel. That said, that move could be short-lived. We understand that positive headlines might support the pound against its major counterparts for a while, but if there isn’t a lot of clarity on how the UK will be leaving the EU on the 31st of October, this could still keep the pressure on GBP. If the bill doesn’t pass, we may see the pound sliding straight away, as this would again increase the chances of a “no-deal” scenario. This is because we still don’t know, if the EU would grant UK an extension or not.

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GBP/CHF — Technical Outlook

GBP was seen strong, yesterday, against all of its major counterparts, especially the safe-havens CHF and JPY. GBP/CHF is once again aiming for the high of last week, at 1.2893. That said, for now, we will stay slightly cautious about higher areas, given that the pair already had a great run to the upside. That said, GBP/CHF has not given us a potential short-term reversal signal yet. We will take a neutral stance, at least for now, as we do have some developments in the UK Parliament later on in the day, which could mix up the technical picture.

A push above yesterday’s high, at 1.2820, could open the door to some higher areas, like the 1.2893 barrier, which is the highest point of last week. The rate might stall around there for a bit, or even correct back down slightly. If GBP/CHF stays above the 1.2820 hurdle, this could attract the bulls back into the field and we may see a move to the upside again. If this time the 1.2893 obstacle surrenders to the buyers, its break could lead the pair to the 1.2936 level, marked by the low of May 15th and by the high of May 21st.

Alternatively, if the rate starts sliding below the 1.2765 hurdle, which is yesterday’s intraday swing low, this could make the bulls worry. A further move down and a break of the 1.2675 zone, which is near the low of October 18th, could invite even more sellers into the game and we could see GBP/CHF making its way to the 1.2615 obstacle, marked near the lows of October 16th and 17th. If that obstacle fails to slow the bears down, its break may lead the rate to the 1.2464 level, marked by the low of last week.

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NZD/CAD — Technical Outlook

This morning, NZD/CAD managed to break above its short-term downside resistance line taken from the high of September 12th. Although the pair looks quite positive, in order to get comfortable with further upside, a break of its key resistance zone, roughly between the 0.8429 and 0.8438 levels, is needed, hence why we will remain cautiously-bullish, for now.

As mentioned above, a strong push above the 0.8429 and 0.8438 resistance area could attract more buyers, as this would place the rate above the current highs of October. We will then aim for the 0.8476 hurdle, a break of which might set the stage for a test of the 0.8503 level, marked by the highest point of September.

On the other hand, a drop back below the aforementioned downside line could temporarily spook the bulls from the field. But in order to get slightly more comfortable with lower levels, a rate-slide below the 0.8365 zone would be needed. That zone is marked near yesterday’s low. A break of it could open the door for a move lower towards the 0.8349 hurdle, which if fails to withstand the bear pressure and breaks, could send NZD/CAD further down, towards the 0.8299 level, marked by the high of October 1st and near the low of October 17th.

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As For The Other Today’s Events

Before the US opening bell we get the Canadian MoM retail sales figures, both core and headline. Both are expected to have improved slightly. The core number is believed to have gone up from negative 0.1% to positive 0.1%. The headline figure is forecasted to come out at +0.5%, which is higher by one tenth of a percent than the previous one. At the same time the US will produce their existing home sales number for September and its annualised change. The sales figure is believed to have gone down slightly from 5.49M to 5.45M. And the annualised change percentage is also expected to have gone down from the previous +1.3 % to -0.7%.

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During the early hours of the Asian morning tomorrow, New Zealand will release its exports and imports numbers, together with the overall trade balance figure. So far, the only available forecast is on the trade balance MoM number, which is expected to come out slightly better, at -1.112M, than the previous reading of -1.565M.


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Originally published at on October 22, 2019.

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