This week, the US Dollar Index was on the loose and continued to the drop of October 1. The reason for this was the agreement between the UK and the EU on the draft Brexit agreement.
Meanwhile, the DXY was losing value and the drop continued until 97.40. Euro and GBP were gaining value against the US currency. On Saturday, the British Parliament will vote on the draft of the agreement. there was a quote from EU President Jean Paule Juncker “there would not be “any kind of prolongation” to Brexit and that “it has to be done now”. This quote has clearly stated that EU are ready and do have plans to reorganize current processes undergoing with the UK. This has made a positive impact on both EURUSD and GBPUSD pairs.
However, if the Parliament rejects the draft and returns it to the opposition, then further delays might halt GBP from reaching highs and possibly cause a drop to 1.25300 and below.
In case Parliament approves the deal, GBPUSD will fly to 1.3200–1.3500 levels, with the first resistance to watch at 1.31850.
Today’s closing price is very important, as we can see the daily candle is forming an ‘evening star’ pattern. Evening star is a trend reversal, so possibly we will get a delay on Brexit and Parliament won’t accept the draft.
On the other hand, there are more factors impacting the currency and not just the Brexit deal. Macroeconomic data from the US were very weak this week. The announced data for Core retail sales, and the Philadelphia manufacturing index were lower than forecasted. This also resulted the US Dollar Index to drop down towards 97s.
EURO GAINS POWER ON BREXIT AND US DATA
The euro has jumped above the 1.1100 level supported by Brexit news and weak US data.
The momentum looks very positive on the chart. Our previous forecast for EURUSD hitting the 1.10400 worked like a charm and we have mentioned that above that level, we will follow the uptrend continuation until 1.1200–1.1280.
Let’s take a closer look at these levels and what should we expect next.
As we can see on the chart, the price is still in the downtrend channel and there is a high possibility that the price will drop to 1.11500 after testing 1.12000.
Do not miss ECB Marginal Lending Facility and ECB Interest Rate Decision on Thursday, October 24, 2019. Markets are waiting for some news and comments from ECB.
TRUSTED SAFE HAVEN ASSETS LOSING VALUE
The fact that the US and China have made significant progress in terms of the trade war has enabled global risk appetite to rise. Therefore, we saw sales throughout the week on safe assets such as gold. Resistances of $1500–1513 per ounce did the job and hold the price below the level. If positive messages come from the UK over the weekend, declines will continue below and Gold will meet the support zone at $1463–1450 per ounce.