Daily FX Brief, October 21 – Major Trade Setups – Brexit Deal Fails to Pass Parliament Vote! 

The U.S. Dollar Index slid 0.3% on the day to 97.28 on Friday. For the first time since December 2018, the index has been down for a third straight week.

The British pound rose 0.6% to $1.2973, posting a four-day rally. On Saturday, the British members of parliament voted to withhold approval of the Brexit deal. It is reported that the U.K. government has asked the European Union for a three-month delay to the Brexit deadline. This morning, the British pound retreated to $1.2919.

Economic Events to Watch Today

Let’s took at these fundamentals.

 

 

  

---

XAU/USD– Daily Analysis

The safe-haven metal prices consolidating in the narrow range of $1,500 to $1,480 since last Monday, as of now the prices slightly dropped due to traders expected more transparency in the Brexit progress.

At the Brexit front, the United Kingdom Prime Minister Boris Johnson attempted to have a meaningful vote on his Brexit deal on Saturday. Still, the U.K parliament declared an act withholding support until full legislation is passed. Therefore, Prime Minister Boris Johnson requested the European Union for a 3-months delay.

On the other hand, the Peoples Bank of China (PBOC changed the loan rate from 4.25% to 4.20%. The LPR is set based on the range above the medium-term Loan Facility rate every month. 

Gold may come under pressure if the yield ends consolidation with a bullish breakout above 1.80%. However, the yellow metal is showing resilience by ignoring losses. The gold mostly drops due to the Central Bank hawkish decisions.

The United States’ ten-year Treasury is currently unchanged around 1.75%. Interestingly, the benchmark yield is also lacking a clear directional bias since October 15. 

At the US-China trade war front, China’s Vice Premier Liu He stated that the China and United States are on the development track and that they completed the phase one agreement. 

Daily Support and Resistance

    

S3 1472.23

S2 1480.87

S1 1485.48

Pivot Point 1489.51

R1 1494.12

R2 1498.15

R3 1506.79

XAU/USD– Trading Tips

The precious metal gold prices remain to trade in the old range of 1,496 – 1,488. On the 4 hour chart, gold has formed an ascending triangle, which is extending substantial resistance at 1,495. Therefore, consider lingering bearish below 1,492 level to target 1,488 and 1,482. 

 

---

EUR/USD – Daily Analysis

The EUR/USD currency pair hit the longest weekly rally since July 2018; the pair surged 1.22% last week. Having recovered by 0.54% and 0.33% in the previous two weeks. It should be noted that the reason behind last week’s bullish trends could be Brexit optimism headline and the resulting rally in the GBP.

At the Brexit front, the United Kingdom Prime Minister Boris Johnson attempted to have a meaningful vote on his Brexit deal on Saturday. Still, the U.K parliament declared an act withholding support until full legislation is passed. So, Prime Minister Boris Johnson requested the European Union for a 3-months delay.

It should also be noted that the German Producer Price Index is scheduled to release at 06:00 GMT, and the Bundesbank’s monthly report is scheduled to release at 10:00 GMT. The EUR currency could face bearish pressure if the September PPI figures well below the forecast of -0.1% month-on-month, supporting slowdown fears. 

The shared currency may hit the bearish track if the European Union takes revenge in the return of the United States’ decision to impose tariffs on $7.5 billion worth of European imports.

    


Daily Support and Resistance

    

S3 1.1035

S2 1.1094

S1 1.1133

Pivot Point 1.1153

R1 1.1192

R2 1.1212

R3 1.1271

EUR/USD – Trading Tips

The bullish engulfing candle above 1.1100 level leads the EUR/USD pair towards the 1.116 level. The RSI and MACD are still showing a buying trend, but the pair may dispense some retracement until 1.1140 before showing a further bullish trend. 

Consider staying bullish over 1.1153 level today to target 1.1160 on the higher side.

---

GBP/USD – Daily Analysis

The GBP/USD currency pair flashing red and representing 0.46% losses on the day, by the way, the GBP/USD currency pair currently trading at 1.2914. Additionally, the GBP currency could come under pressure further according to the forecasted by the options markets.

The GBP/USD currency pair options market is down on GBP currency since April. Moreover, the investors are adding bets for a decline in the Pound currency due to fading Brexit optimism.

One-month risk reversal (GBP1MRR), a gauge of calls to puts on the GBP fell by -1.70 on Friday, but it is currently found at -1.65. Friday’s figures were the weakest level in 6-months. On the positive note, the gauge had surged to a 21-month top of 0.125 on October 11.

The decline from October 11 high of 0.125 to October 17 low of -1.70 hints the investors were anticipating the United Kingdom parliament to put obstacles on Prime Minister Boris Johnson Brexit’s agreement.

As we know, the Super Saturday burned all the expectations due to the U.K parliament declared an act withholding support until full legislation is passed. Meanwhile, Prime Minister Boris Johnson requested the European Union for a 3-months delay.

Daily Support and Resistance

S3 1.2635

S2 1.2784

S1 1.2876

Pivot Point 1.2932

R1 1.3025

R2 1.3081

R3 1.3229

GBP/USD – Trading Tips

The GBP/USD is trading sharply bullish above but within a bullish channel. The bullish channel is giving support around 1.2900 level. The GBP/USD has formed a test bar pattern on the 4-hour chart, which is suggesting a bullish trend in the Cable.

The next support stays at 1.2900, and resistance is likely to remain at 1.3050 today. Consider staying bullish above 1.2932 today. 

All the best!