Another Brexit agreement, but still no Brexit deal

Forex Signals US Session Brief, November 22 – Sentiment Improves After Positive Comments on Brexit and the Italian Budget

Posted Thursday, November 22, 2018 by
Skerdian Meta • 3 min read

Financial markets were pretty quiet during the early European session with a slight weakness in commodity Dollars. But, rumours for a positive outcome regarding Brexit and the Italian budget got the markets moving. The Italian Deputy Prime Minister Matteo Salvini commented that he was ready to meet with EU’s Moscovici and Juncker and added that he doesn’t like to fight, although he kept his opposition on the deficit. Moscovici followed a bit later saying that Italy and the EU can reach an agreement. Perhaps, we will see a breakthrough soon.

We had another breakthrough this morning regarding Brexit, or so it seemed at that moment. News portals posted reports that the EU and UK officials had agreed on a draft. At first glance, some of the details look like something new, such as replacing the backstop in the future or EU and the UK committing to deep customs cooperation but overall, things are close to where they were, perhaps just a small step forward. But that is enough for the market for now and the GBP rallied more than 100 pips higher. Although, the enthusiasm wore off pretty quickly and GBP/USD is near the opening price for the day.

The European Session

  • Salvini Ready to Talk With the EU – Italian Deputy PM Matteo Salvini commented this morning that he is ready to meet Moscovici and Juncker and that he doesn’t like to fight either. But, he also highlighted that the deficit will remain at 2.4%.
  • China Worried About IP Theft Accusations – China’s Commerce Minister said that they won’t accept groundless accusations on Intellectual Property theft as a recent US report shows and urges the US to curb such reports.
  • Swiss Q3 Industrial Output – The industrial output for Q3 in Switzerland was expected to have increased by 6.2%, but the actual number came at 1.4%. The previous number was revised higher to 8.9%, but still, the Q3 figure is a big miss from expectations.
  • Moscovici Feels Convinced for An Agreement With Italy – These were promising comments from the EU budget commissioner. He added that it is in everyone’s interest to reach a deal. Let’s hope they do.
  • EU-UK Negotiators Agree on Draft Text – Well, they have agreed many times recently yet we don’t have a final text. The Irish backstop will be removed after some time but they didn’t give us an answer about what will happen after that. The EU and UK will commit to ‘deep’ customs cooperation to build on ‘single customs territory’. Tough to see this go past the UK parliament. EU’s Donald Tusk added that this is only agreed on principle and it will have to be approved by 27 member countries.
  • ECB Meeting Minutes – The minutes from the last meeting of the European Central Bank were released earlier on and the main headline is that they see the recent data as consistent with a broad-based economic expansion. Although, they saw the risks tilted to the downside, which is new since they have seen risks balanced in previous meetings.

The US Session

  • This is the Right Deal for Theresa May – UK Prime Minister Theresa May was speaking at the Parliament saying that this is the right deal for the UK and it delivers on the referendum vote. A deal is within our grasp and that includes Gibraltar. Still no final deal though and when we get it, it will have to go through the UK Parliament and the EU 27 countries.
  • South Africa Raises Rates Again – SARB increased interest rates again from 6.00% to 6.75%. Inflation expectations were lowered but they still see four more rate hikes of 25 bps by the end of 2020.
  • Theresa May’s Deal Not Enough for the Labourers – A Labour Party official commented on Bloomberg that the agreement on post Brexit is not enough to get their support. Well, we know the Labour Party isn’t going to support any deal that Theresa May makes.
  • Canadian Q3 Corporate Profits – Corporate profits rose by 3.9% in Canada during Q3 2018. That’s higher than the 1% increase in Q2 and it is the highest since the same period last year.
  • Eurozone Consumer Confidence – The consumer confidence is expected to come at -3 points, the same as last month. This indicator was positive at the beginning of the year, but it has declined steadily and now it stands at -3 points.

Trades in Sight

Bearish EUR/CHF

  1. The trend has turned bearish this week for EUR/CHF
  2. The retrace is almost complete on the H4 chart
  3. The 50 SMA is catching up

The stochastic indicator is almost overbought

The H1 chart is well overbought for EUR/CHF but it is now nearly overbought on the H4 chart as well. The trend is bearish for this pair and the retrace higher is almost complete now after the boost that this pair received on the UK-EU agreement comments. The 50 SMA is also catching up with the price, so it is supposed to provide resistance to EUR/CHF if this pair climbs higher.

In Conclusion

Apart from a few minutes of volatility after the news that the EU and UK negotiators had reached an agreement, the markets have been quiet today. The US is off for Thanksgiving Day, so I expect the price action in forex to die out as we approach the end of the European session. It seems that our forex signals will remain open for another day.

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