Good Monday traders!
Let’s briefly review on what’s going on withing Brexit and China news. The UK spent the last few weeks trying to find a proper agreement for a deal. Although the deal between EU and UK was made, UK PM needed to present the deal to the Parlament so they can vote and decide whether to leave the UK with the accepted deal or ask for another delay.
On Saturday Parlament failed to approve the deal which means that PM will need to ask for another Brexit delay. There is no guarantee that the EU will say yes to that and still the possibility that the UK will leave without the deal exist. The UK is supposed to leave European Union on October 31st.
Positive progress to the deal should send GBP pairs to the upside while negative talks can destroy GBP pairs back to the downside. It’s a good idea to follow FTSE100 and FTSE250 indices while this whole Brexit uncertainty flowing around.
China revealed that its economy grew by 6% in the previous (third) quarter of this year which is lower than economists predicted. This growth rate is the weakest since 1992. The current trade war between the US and China is hurting both CNY and China economy itself. Looking at the bigger picture though, the agreements are a bit closer. So the next few months will be fairly interesting to follow.
Currencies like NZD and AUD are quite depended on China economy, and while we have uncertainty, NZD and AUD are being hurt as well. We saw a bit of a pullback from NZD/USD and AUD/USD but the pairs approached few key levels by now. So it’s key to follow whetver we reject the regions and show another downside leg, or we go straight through the levels to the upside.
During these times of uncertainty, currencies like JPY, CHF is more likely to advance in value because of both acts as a safe-haven currency. Just like GOLD. However, any positive momentum from Trade War talks and Brexit will be “accepted” as a risk-on condition and riskier assets might rally while GOLD and safe-haven currencies pullback a bit to the sell-side.
Wishing you a fantastic week ahead!
Matt from Technical FX5