Dollar Stays Soft as Fed Powell and Clarida Called for Patience, But No Extended Selling
Action Insight Mid-Day Report 1-11-19
Sterling Jumps on Brexit Delay Talks, Dollar Steady after CPI
Sterling surges broadly today on rumor that there will be delay in the Brexit date. Even though the government came out quickly denying intention for Article 50 extension, the Pound stays firm. As next Tuesday's Brexit meaningful vote looms, it's just getting less and less likely for the Brexit bill to get through the Parliament. Prime Minister Theresa May will have to table a Plan B within days. And no matter what path May would seek, referendum or election or something else, a delay of Brexit is inevitable. So the rumor is actually not so much a piece of news.
Anyway, the Pound is the second strongest one for today, following New Zealand Dollar and followed by Australian Dollar. Dollar remains the weakest one for today and the week after CPI release provides little inspiration. Canadian Dollar is the second weakest as WTI crude oil seems to be losing upside momentum. Euro is the third weakest.
Technically, GBP/USD's break of 1.2814 resistance is taken another an early sign of trend reversal. And that could add to the case of Dollar bearish trend reversal too. We'll how things develop ahead. The more immediate focus just before weekly close is 51.59 in WTI oil and 1.3259 minor resistance in USD/CAD. Break of these levels would suggests short term topping in WTI and CAD.
In other markets, US futures are pointing to a slightly lower open as US government shutdown ties record. Major European indices are generally lower. FTSE is down 0.47%, DAX is down -0.69%, CAC is down -0.85%. German 10 year yield is up 0.0369 at 0.236. Earlier in Asia, Nikkei rose 0.97%, Hong Kong HSI rose 0.55%, Shanghai SSE rose 0.74%, Singapore Strait Times rose 0.48%. Japan 10 year JGB yield stayed positive at 0.013.
GBP/USD's rise and breach of 1.2814 resistance today argues that a medium term bottom might be in place at 1.2391, on bullish convergence condition in daily MACD. Intraday bias is back on the upside for further rebound to 1.3174 resistance, which is close to 38.2% retracement of 1.4376 to 1.2391. For now, such rebound from 1.2391 is seen as a corrective move. Hence, we'd expect strong resistance from 1.3174 to limit upside. On the downside, below 1.2709 minor support will turn bias to the downside for retesting 1.2391 low instead.