Forex Signals US Session Brief, Oct 23 – Markets on Standby Again After the Brexit Extension Request
Skerdian Meta • 4 min read
Markets turned quite exciting in the last two weeks, as the US and China agreed for the Phase One of the trade deal, while Boris Johnson and the EU reached a Brexit deal. Risk assets turned quite bullish while the GBP surged higher and on Friday last week, buyers managed to push GBP/USD above 1.30. Yesterday the climb in risk assets stopped though and markets were waiting for the Brexit vote in the British parliament.
Boris Johnson won the first vote yesterday, but lost the meaningful vote in the evening. It was a close call, but it was not enough and the reason was the DUP Party which voted against. Had they voted for the Brexit deal, the deal would have passed. The UK has asked for an extension, but we don’t know whether the EU will grant it and how long it will be. The DUP Party and the opposition are calling for general elections if the extension is until the end of the year and it seems likely that we might get new elections. But again, things are pretty uncertain now and markets are waiting on the sidelines again today.
The European Session
- Labour and DUP Want new Elections – Boris Johnson’s Brexit deal was rejected yesterday and now the UK is waiting for another extension from the EU. But, general elections seem pretty likely if the extension is until the end of the year. Labour MP Richard Burgon tweeted this morning that his party will back a general election if EU agrees to extension. DUP’s Wilson also said that he would welcome a general election. Fundamental changes are needed to the Brexit deal for DUP to support it.
- China is Not Replacing the Hong Kong Leader – The Chinese foreign ministry commented this morning on rumours that they might replace the Hong Kong leader after backing down due to protests. China shot down reports of plans to replace HK chief executive Carrie Lam. They dismissed the earlier report as a ‘rumour’. The report was a ‘political rumour with ulterior motives’ and reiterated that the Chinese central government firmly backs Lam.
- Will OPEC+ Cut Production Again in December? – Yesterday we heard rumors that OPEC+ might decide to cut production again in December and place lower quotas for the member countries. Today Russian energy minister Alexander Novak said that Russia has had no official proposals from OPEC+ members to change the deal. He added that all OPEC+ members need to comply with the current deal in full.
- Not the Time for the BOJ to Cut Rates – Many major central banks have cut interest rates in recent months as the global economy weakens and the eyes are on the Bank of japan to do the same now. But, Wall Street Journal released a report, citing people familiar with the BOJ, saying that some policymakers see little justification for a rate cut this month, believing the ammunition should be saved for worse economic conditions. Adding that while matters could quickly take a turn for the worse, BOJ officials believe they now have some “breathing room” with one official quoted as saying “the bank doesn’t want to waste its bullets”.
The US Session
- Canadian Wholesale Sales – The report released last month showed that retail sales posted a big climb of 1.7% in July, which was revised lower to 1.4% today. Today’s report was expected to show a 0.3% increase for August, but it missed expectations and turned negative, showing a 1.2% decline. Inventories also turned negative, coming at -0.3% from +0.3% prior, which was revised down from +0.5%. This is the first inventory decline in 12 months.
- BoJo’s Spokesman Also Confirms the Elections – Boris Johnson’s spokesman, Slack said a while ago that if EU offers a January extension, there will need to be an election. Johnson spoke to Tusk and told him he still opposes an extension. No meeting of minds with Corbyn after meeting. Johnson wants to get his deal done by October 31 but yesterday’s vote makes no-deal more likely. If an extension is vetoed, we have a plan to get it done. When asked if he could hold an election before Christmas, spokesman says ‘yes’.
- A Flexible Extension for the Irish – Irish foreign minister commented just now that if there is a Brexit extension, he thinks that the extension will be a flexible one, ‘but let’s wait and see’. It probably means that the UK might decide to leave when it wants, if they get things sorted out.
- Eurozone Consumer Confidence – The Eurozone advance October consumer confidence was released just now and it missed expectations. Expectations were for a slight deterioration, from -6.5 points last month to -6.7 points in October. But consumer confidence deteriorated further this month, falling to -7.6 points. That’s the lowest since December 2018. It’s yet another negative sign for the Eurozone economy and for the Euro but there has been no market reaction.
Trades in Sight
Bullish NZD/USD Again
- The trend has turned bullish in the last week
- MAs are providing support
- The retrace lower is complete on the H4 chart
The 20 and the 200 SMAs have acted as support for NZD/USD on the H4 chart
NZD/USD has turned pretty bullish in the last week or so. The market sentiment has improved, which helps risk currencies, while the USD has turned pretty soft recently as the FED turned dovish, cutting interest rates twice and preparing for another cut later this month. During the uptrend, the price has been finding solid support at the 20 SMA (grey) on the H1 chart, but today it found support at this moving average and the 200 SMA (purple) on the H4 chart. Now the retrace is over as stochastic is turning upwards and the price is bouncing off those moving averages.
The consumer confidence deteriorated further in the Eurozone, which is a negative sign for retail sales and business in general for months to come. But, the Euro didn’t mind much since everyone is concentrating on Brexit right now and traders are waiting to see what will happen in the UK now, probably general elections soon.