The price action in financial markets today has been pretty quiet and I expected it to get even more quiet and eventually die out as we head toward the end of the European session, since North American markets are closed for Remembrance Day. Although, we have seen some decent price action in GBP pairs during the European session. GBP/USD surged around 120 pips higher earlier on. But, that didn’t come from the GDP report, which showed that the UK economy continues to weaken since all components missed expectations and many of them came in negative.

The UK GDP contracted during August and September, but in Q3 as a whole, the UK GDP expanded by 0.3%, which means that the UK narrowly avoided a technical recession, after the 0.2% contraction in Q2. But, the economy continues to weaken, as the last two monthly GDP reports have shown. Besides that, manufacturing, industrial production and construction contracted again in September, while business investment fell flat in Q2.

So, the GBP didn’t move much on these figures, but Nigel’s Farage comments on UK elections sent the GBP surging higher. Earlier this month, we heard the Brexit Party leader Farage say that his Brexit party would fight in all fronts on UK elections which will be held on December 12. But today, he said that he won’t challenge the Conservative Party seats and instead, will focus on taking seats away from Labour. That goes in favour of the Tories and lowers the odd of a hung parliament after the elections. Although the situation is not so clear, the GBP has run away with those comments.

The European Session

• French Industrial Production – Industrial production has been volatile in France, posting some big declines in two out of the last three months. Last month’s report showed that industrial production declined by 0.9% in August, while this month production was expected to have increased by 0.4% for September. But, it missed expectations coming at 0.3%. Private payrolls came in at 0.3% as expected for the same month, but August was revised lower to 0.2% from 0.3%. The trade balance deficit also increased further today.
• Pompeo Speaking in Berlin – US Secretary of State Pompeo is speaking in Berlin, saying to the German audience that your own intelligence chief has said Huawei cannot be trusted. Referring to the Nord Stream 2 gas pipeline, Pompeo said that we don’t want Europe’s energy supplies to depend on Putin’s whims. We seek all nations help in bringing Tehran back to the negotiating table. NATO needs to grow and change, otherwise it runs the risk of becoming obsolete. We want more trade with Europe. Irrational to think of Russia as a worthy partner in the Middle East. US officers are still on the ground in Syria, we did not withdraw. China today suppresses people with tactics.
• RBNZ to Cut Interest Rates in the Next Meeting? – The Reserve Bank of New Zealand has cut interest rates twice in the last several meetings, bringing them down by 75 basis points. They have stopped cutting rates but odds lean towards another rate cut in the next meeting.
• Scotland’s PM Speaking on Brexit – Scotland’s First Minister Nicola Sturgeon made come comments earlier today. She said that if there is a hung parliament then her party will seek to form a progressive alliance to lock conservatives out of government. If the SNP wins the election in Scotland the question to UK Parliament would be, “What gives you the right to stop independence vote?” SNP will look to form alliances in Parliament to stop Brexit. Would drive a hard bargain to give support to a party to form Government.

The US Session

• Canadian Housing Report – Building permits declined in Canada by more than expected, coming in at -6.5% in September versus -2.0% estimated. The prior month was also revised lower to 5.6% from 6.1%. Residential permits also came in negative at -10.7% in September, with single family permits at -8.7% and multiple permits at -12.1%.
• Canadian Employment Report – The employment report from Canda has released and the unemployment rate remained unchanged at 5.5% as expected. But, the net change in employment came at -1.8k against 15k estimated. The prior month remained unchanged at 53.7k. Full-time employment came at -16.1k vs +2.5k expected. This is a negative sign, but it comes after a strong month when full time employment increased by around 70k. The participation rate remained unchanged at 65.7% versus 65.7% estimated.
• FED’s Bostic Speaking – Atlanta FED president Bostic was speaking on Bloomberg TV a while ago, saying that he thinks the FED is slightly accommodative. We don’t have that much space in a downturn and risks to the economy are still out there, much has not been resolved. Filling entry-level jobs is extremely competitive. We are seeing competition and that’s showing up in wages and pay jumps for people changing jobs. I probably would have dissented against October rate cut.

Trades in Sight

Bearish GBP/USD

• The trend has been bearish this week
• The USD has turned bullish
• MAs are pushing the price lower

The 200 SMA is provided solid resistance for GBP/USD today

GBP/USD has been pretty bullish in recent weeks, as the prospects of a no-deal Brexit scenario have declined considerably. But, the trend has shifted this week as the attention turned to the USD. Moving averages have been providing resistance for this pair on pullbacks higher, pushing the trend lower. Today, we are seeing a small retrace higher, which looks more like consolidation. But the 200 MA (purple) has turned into resistance, which is preventing this pair from climbing higher. So, I think that consolidation might be over soon.

In Conclusion

The USD has been bullish all week and it is making new highs today, so it seems like the Buck will end the week on the right footing. Although, in the last few hours, safe havens have attracted some bids as well. So it seems like the market is preparing before the weekend, as traders position themselves just to be cautious, since anything can happen over the weekend – a war could start.