British Pound (GBP) Latest: Brexit Talks May Weigh on GBP/USD and FTSE 100 Prices

BREXIT, BRITISH POUND (GBP) AND FTSE 100 - NEWS, PRICES AND ANALYSIS:

• FTSE 100 struggling to move higher.
• GBP/USD downside pressure remains.

BREXIT TALKS RESUME, POTENTIAL TIMETABLE FOR UK ENDING CORONAVIRUS LOCKDOWN

Volatility in the UK asset markets may take a turn higher this week as trade talks resume between the UK and the EU. Last week the UK negotiator David Frost said that there would be no extension of the Brexit transition period – December 31 2020 – even if the EU request one, leaving little changed in the gridlocked relationship between the two. If no progress is made at this week’s meeting, UK assets will likely come under pressure again, leaving their recent gains at risk.

The UK government is also said to be looking at a timetable to reopen the country from the coronavirus lockdown. Early May has been mentioned for the first stage of the process if certain criteria are met with the UK government keen to get the economy re-booted as soon as possible.

The FTSE 100 is currently stalling around 5,800 after having regained around 35% of the January 20 – March 22 sharp sell-off. Technical resistance is seen at 5,883 (50-dma), ahead of 38.2% Fibonacci retracement at 5,889 and the recent one-month high at 5,948. Short-term support is seen at 5,524.

FTSE 100 DAILY PRICE CHART (JULY 2019 – APRIL 20, 2020)

The short-term series of lower highs on the GBP/USD daily chart suggest the pair may continue to move lower with an area between 1.2405 and 1.2420 the first zone of support ahead of 1.2360. The pair may struggle to break 1.2648 if bullish sentiment returns.

GBP/USD DAILY PRICE CHART (AUGUST 2019 – APRIL 20, 2020)

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EUR/USD Rate Forecast: November Low on Radar Following ECB Meeting

EUR/USD RATE TALKING POINTS

EUR/USD remains under pressure following the European Central Bank (ECB) interest rate decision, with the November low (1.0981) on the radar as the exchange rate extends the series of lower highs and lows from the previous week.

EUR/USD RATE FORECAST: NOVEMBER LOW ON RADAR FOLLOWING ECB MEETING

EUR/USD extends the decline from earlier this month as the ECB sticks to the same script and endorses a dovish forward guidance at its first meeting for 2020.

The Euro came under pressure as President Christine Lagarde emphasized that the “Governing Council continues to stand ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner,” and the ECB may expand its balance sheet throughout 2020 as the risks surrounding the Euro area “remain tilted to the downside.”

It seems as though the ECB is in no rush to alter the monetary policy outlook even though the US and France reach a trade truce, and the Governing Council may continue to rely on non-standard measures to support the economy as the central bank struggles to achieve its one and only mandate for price stability.

In turn, the Euro may face headwinds ahead of the next meeting on March 12 and EUR/USD may continue to give back the rebound from the 2019 low (1.0885) as the correction stalls ahead of the August high (1.1250).

EUR/USD RATE DAILY CHART

Source: Trading View

• The broader outlook for EUR/USD remains tilted to the downside as the exchange rate cleared the May-low (1.1107) following the Federal Reserve rate cut in July, with Euro Dollar trading to a fresh yearly-low (1.0879) during the first week of October.
• The monthly opening range has been a key dynamic for EUR/USD in the fourth quarter of 2019 as the exchange rate carved a major low on October 1, with monthly high for November occurring during the first full week of the month, while the low for December happened on the first day of the month.
• With that in mind, the correction from the 2019 low (1.0879) may continue to unravel amid the failed attempt to test the August high (1.1250), and the bearish price action from the start of the month looks poised to persist as EUR/USD extends the decline from the December high (1.1239), with the exchange rate snapping the upward trend from late last year.
• The Relative Strength Index (RSI) highlights similar dynamic as the oscillator failed to preserve the bullish formation from November after failing to push into overbought territory.
• As a result, the recent series of lower highs and lows brings the November low (1.0981) on the radar, but need a break/close below the Fibonacci overlap around 1.0950 (100% expansion) to 1.0980 (78.6% retracement) to open up the 2019 low (1.0879).

                                                  

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GBP/USD Respecting Support as BoE Decision Nears

STERLING (GBP) PRICE, CHART AND ANALYSIS:

• There is a 50/50 chance of a UK rate cut this Thursday.
• EU chief Brexit negotiator Barnier speaks later today.

BRITISH POUND (GBP) LIKELY TO REMAIN RANGEBOUND AHEAD OF ‘LIVE’ BOE MEETING

Sterling is marginally better-bid in early European turnover as traders remain focused on Thursday’s Bank of England meeting where there is currently a 50/50 chance of a 0.25% interest rate cut. The last cut, in August 2016, came shortly after the UK voted to leave the EU, and it remains to be seen if the MPC will use this meeting to trim rates further, especially after last week’s better-than-expected PMI data for January. The common consensus now is for the MPC to vote 6-3 for unchanged rates - from 7-2 at the last meeting - with the central bank likely to wait for more hard data to indicate the strength, or not, of the UK economy.

POST-BREXIT TRADE TALKS – PREPARATIONS CONTINUE

The post-Brexit battle lines continue to be drawn with the EU reiterating today that the UK must allow the EU continued access to UK fishing waters in order to obtain future concessions and continued access to the EU financial services sector. Whether this is an EU ‘red-line’ or is just part of a bargaining position will be seen over the next few weeks. Chief EU Brexit negotiator Michel Barnier is speaking at Queen’s University Belfast later today and his commentary may well dampen any further Sterling upside.

GBP/USD EDGING BACK TOWARDS 1.3100

Cable is currently nudging higher and trying to re-take 1.3100. The pair have broken through minor resistance from the 20- and 50-day moving averages, currently at 1.3065 and 1.3087 respectively, although a close above both will be needed to underpin the next move higher. Resistance either side of 1.3150 guards the short-term target of 1.3177, last Friday’s high. This near three-week high may prove difficult to better with the BoE meeting looming on the horizon. Short-term support between 1.3050 and 1.3058.

GBP/USD DAILY PRICE CHART (AUGUST 2019 – JANUARY 27, 2020)

                                                                            

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EUR/USD Technical Analysis: Euro Downtrend May Have Restarted

EUR/USD TECHNICAL ANALYSIS: BEARISH

• Euro break of 4-month support sets the stage for downtrend resumption
• Initial support at 1.0968, breakdown may expose October swing bottom
• Close above 1.1149 probably needed to offset near-term selling pressure

The Euro has broken support guiding its recovery against the US Dollar since the beginning of October. That paints the rise as corrective within the context of longer-term downtrend that has now apparently resumed. The reversal has been in the making since the beginning of the year, following in the wake of a false breakout above the 1.12 figure (as expected).

From here, the next layer of immediate support lines up in the 1.0968-90 congestion region. A break below that confirmed on a daily closing basis probably opens the door to a challenge of October’s swing bottom at 1.0879. Neutralizing immediate selling pressure likely requires a reversal to close above downward-sloping resistance set from the December 31 high, as well as the inflection point at 1.1149.

Measuring the depth of prior downswings within the current trend – in play since mid-2018 – produces an average decline of 4.6 percent. A repeat of these trading patterns here would imply a move lower that puts EUR/USD just above the 1.07 figure. That would amount to the lowest level since April 2017. Naturally, immediately prevailing market conditions might still dictate a larger or smaller move.

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