Yesterday the markets were trading the hangover from last Friday. The US Dollar was dumped heavily on Friday for no apparent reason because the US Government shutdown ended, but the market has its own mind and that’s what’s happened that day. Gold was the first to make a move and benefit the most, surging 25 cents higher on Friday breaking above the big resistance level at $1,300. Yesterday, Gold sellers tried the $1,300 level again which has now turned into support, but failed and today the bullish trend has resumed again as Gold pushed above $1,310.

ECB’s Draghi and Carney from the BOE held speeches yesterday but they didn’t impact the market much. Another fundamental event which surfaced yesterday was the Brexit amendments which are being discussed today at the British Parliament. Prime Minister Theresa May is trying to pass the Brexit deal with whatever means necessary and the amendments might convince enough British MPs to get enough votes to do so.

There were a number of possible amendments on the table yesterday and today it seems like the Prime Minister has decided to go with the Cooper Amendment and the Brady Amendment. The Cooper Amendment requires the British Parliament to pass a bill requiring Theresa May to seek an extension to Article 50 until 31 December from the 31 March deadline, if she can’t get her deal passed before 26 February, but the postponing might be for three months instead of nine. This is also an amendment to prevent a no-deal Brexit outcome.

• Swiss Trade Balance – The trade balance has been positive for a long time in Switzerland and last month it peaked at 4.74 billion CHF, which was revised higher to 5.75 billion today. Today, the trade balance which is for December was expected to cool off to 4.55 billion CHF but it missed expectations declining to just 1.90 billion.
• UK’s Fox Against the Cooper-Boles Amendment – The UK Trade Secretary Liam Fox had reservations for these amendments early this morning. He said that there will be another opportunity for lawmakers to vote against no-deal Brexit. He also notes that there’s much less appetite for no-deal Brexit in EU with the German economy weakening
• Theresa May to Seek Legal Changes to the Backstop – The BBC and Buzzfeed senior political correspondent, Alex Wickham, reported this early in the morning and said that this would convince the vast majorities of MPs to vote for the Brady Amendment.
• Spanish Q4 Unemployment Rate – The unemployment rate has been on a consistent decline in Spain, but it still remains pretty high. In Q3 2018 unemployment declined by seven points, falling from 15.3% to 14.6%. Today’s report which was for Q4 was expected to tick lower by one point and it did, falling to 15.5%.
• It’s All About the Backstop for the DUP Party – The Member of the North Ireland DUP Party Sammy Wilson said the backstop has to be removed. The backstop and withdrawal agreement as it stands are not acceptable. He added that DUP has had private discussions with Theresa May on the matter. DUP leader Arlene Foster said that her Party endorses the Malthouse compromise. The plan for that is to replace the current backstop and also extend the transition period to December 2021.
• EU Is All Done With Brexit – The European Commission said a while ago that there’s nothing new on the table from them. They added, don’t look to Brussels with regards to Brexit, look at London.
• Theresa May’s Spokesperson Speaking – UK PM’s spokesman James Slack held a conference earlier today saying that Theresa May supports the Brady Amendment. Theresa May said that to get Parliament support, legal changes to the backstop are required. That would mean reopening the withdrawal agreement. May is set to speak first in the Brexit debate to set out support for Brady Amendment, although today’s vote would not be the last chance for Parliament to express its will. He added that May is planning to speak with European leaders today.

The US Session

• Mnuchin Expects Significant in Trade Talks With China – US Treasury Secretary Steve Mnuchin was in an interview on Fox just now with such comments. The US economy is strong, companies are doing well, no indication of a recession on the horizon, and there is a ‘very good chance’ of achieving 3% economic growth this year. He said that Huawei is a separate issue from China trade talks. Everything is on the table with regards to tariffs and trade. But, President Trump has made no decisions yet on dropping China tariffs.
• EU Is Responding to Brexit Amendment Already – The EU has already prepared a response in case the Brady amendment passes UK parliament and it will be that they will not renegotiate the withdrawal agreement, according to an unnamed EU official cited by Bloomberg. All that fuss for nothing.
• S&P/Case Shiller Composite-20 HPI y/y – This indicator which shows the change in the selling price of single-family homes in 20 metropolitan areas came at 0.3% for November against 0.4% expected. The annualized number has been declining constantly in the last several months from around 6% some time ago to 4.7% today, which is much lower than 5% expected.
• Theresa May Speaking in the Parliament – UK PM May is speaking at the British Parliament and she just said that the EU is unlikely to postpone Article 50 without the UK having a plan about what they’re going to do next. Although, I think that the EU would extend Article 50 indefinitely. There are plenty of people and businesses in the EU that would suffer from a no-deal Brexit.
• BOE Carney Speaks – Bank of England Governor Mark Carney is speaking right now and the questions seem more related to the technology, rather than the monetary policy. Although, anything he says won’t have any impact now that Brexit is where it is.

Trades in Sight

Bullish USD/JPY

1. The trend has been bearish in the last three days
2. The retrace higher is complete
3. The 100 SMA is providing resistance
4. The previous candlestick points to a bearish reversal

The 50 SMA did a good job holding the pullback again today

We went short on USD/JPY a while ago as this pair was retracing higher after the downtrend of the last two days. Although, the retrace seems complete now since stochastic is overbought on the H1 chart and the 100 SMA (green) provided solid resistance on the first attempt to break higher. The price formed an upside-down hammer candlestick in that chart which is being followed by a bearish candlestick, so it seems as the reverse is already underway.

In Conclusion

The GBP is feeling well once again after the slight retrace lower in the last two days. GBP/USD is challenging the highs now as the Brexit debate heats up in the British Parliament. As we explained, there are a few amendments which are favoured by the Prime Minister, but let’s see which one the Parliament will pick.