Yes, this week has been all about Brexit. But thankfully, this drama is coming to an end, or perhaps not, no one knows for sure. Surely the markets don’t know right now and the price action tells the story. We saw a 100 pip climb in the Euro earlier this week and a 200 pip jump in GBP pairs as news of a Brexit deal started coming out. But yesterday, the GBP dived around 300 pips as rumours about a vote of no-confidence for Theresa May surfaced in British politics.

The Brexit Secretary Dominic Raab and other cabinet members also resigned which turned the sentiment negative in financial markets. In fact, the rumours implied that we were going to see Theresa May go through the UK Parliament yesterday. But apparently, the vote of no-confidence will be held next Tuesday according to Brexiteers. Besides that, the Brexit deal is not sealed yet, as EU and UK officials say, and that has given some support to the GBP today.

The sentiment is still pretty negative in financial markets though, which can be observed from the climb in the JPY and Gold in the last few sessions. Regarding cryptocurrencies, the big decline has ended, so cryptos are safe for now.

The European Session

• New Brexit Secretary On the Way – Yesterday, Dominic Raab resigned as the Brexit Secretary. This morning, Theresa May said that she talked with Michael Gove, apparently about taking up the free position. She added that the Government is trying to resolve issues with the DUP Party of Northern Ireland, since they didn’t like the deal. The Brexit deal maintains the integrity of the UK she said and the deal with the EU is pretty good. Let’s see if it will be accepted or altered in the coming days.
• Draghi Acknowledges the Slowdown – Mario Draghi held a speech in Frankfurt today. He accepted that the economy of the Eurozone has slowed, but that is happening across the globe, according to him. He added that if economic inflation outlook deteriorates, then it will be reflected in the adjustment of rate hike path. Well, rate hikes haven’t started yet for the European Central Bank, so perhaps they will postpone the first hike even further. Overall, he sees risks as balanced for both sides.
• Eurozone CPI Inflation Report – The consumer price index report for the Eurozone was released this morning and it showed that core inflation remained unchanged at 1.1% while the headline inflation remained also unchanged at 2.2%.
• Next Tuesday Is the Test For Theresa May – A report in The Telegraph suggests that the 48 letters of no-confidence on Theresa May will be passed today and next Tuesday will be the day for May to be voted to remain or to leave the Prime Minister position.
• Is Gove taking the Brexit Secretary Job? – UK PM May said earlier today that she had spoken with Gove about Brexit and Gove said a little later that he is looking forward to working with the Government on Brexit plans. It seems that Gove has accepted the position.

The US Session

• Canadian Manufacturing Sales – Manufacturing sales were expected to grow by 0.1% month-on-month. Although, core manufacturing sales declined by 0.5% while manufacturing orders declined by 0.3%.
• No Deal Could Happen for Liam Fox – UK Trade Secretary Lim Fox said a while ago that the UK could end up with no deal but that would be unfortunate. He added that they need to focus on negotiations as they are not complete. Never be too sure about Brexit until everything is complete.
• FED’S Clarida Feeling Optimistic – Florida FED’s Clarida said that there’s still some more room to run in the labor market but he is optimistic on productivity outlook. Interest rates are close to or at neutral now and the FED should be data dependant on future rate hikes.
• US Industrial Production – The industrial production was expected to increase by 0.2% in October, but increased only by a mere 0.1%. Although, the capacity utilization rate increased from 78.1% to 78.4%.

Trades in Sight

Bearish NZD/USD

1. This pair is still bullish
2. The retrace lower is complete
3. The 50 SMA provided support

The 50 SMA provided support despite being pierced

NZD/USD has been on a solid uptrend for quite some time. We saw a retrace lower this morning but didn’t get in on a trade because we already went long on AUD/USD.

But that was a great opportunity to buy this pair. The stochastic indicator was oversold, so the retrace was complete and the two doji candlesticks pointed to a possible reversal. The reversal happened quite swiftly and now the buyers are in control on this pair.

In Conclusion

The market has been uncertain today, but right now it is leaning against the USD. I don’t see any reason why, but it’s Friday so perhaps traders are closing off some of their long USD positions before the weekend.

By the way, Mario Draghi said that EU countries with a big deficit must be more cautious. That was obviously addressed to Italy. Next week, the EU will take the decision regarding the Italian budget for 2019, so there will be some volatility again in Euro pairs.