The British Pound today felt the brunt of the markets as it dropped on news that once again Brexit talks had failed to materialise anything, even though initially there was hope. After starting the day stronger on the fact that the UK government had increased the divorce bill and also reports that the UK may treat Northern Ireland as a EU region it has come up short and created further headaches. Thus far the DUP (Northern Ireland party) have turned around and said that to be part of the EU was not part of the agreement. The Tory government is playing their bluff though as they don't expect it to lead to a collapse in government. As a result the pound is probably set for a large amount of volatility over the next few days given the recent developments, and we could see some strong power plays for the UK economy. The economic news so far has been positive, but it's the political stuff that will drive markets in the short term and I do believe that the bulls could still hold on even in this environment.
For the GBPUSD it has been all about the levels as of late, as traders have bounced off them when uncertain, and rushed through when they get a glimmer of hope. Today we saw the market start of just above support at 1.3438 and have so far managed to keep in the black. Resistance levels at 1.3523 and 1.3588 are currently the big road block for the bulls looking to climb higher. In the event the GBPUSD did swing lower, and it could very well do so with the recent news. Then I would expect it could burst through support at 1.3438 and look to move lower to 1.3339 in the current market climate. So far it's very much been the case of big candles and volatile swings and there is nothing to say that it will change anytime soon.
The market won't be quiet today though in the Asia session as the Australian dollar is expected to move on the back of the RBA rate decision and following questions after. Always a hot one for the markets, the Australian economy has been lacklustre as of late and many are looking for improvement. One of the man features of weakness has been the wage market which has fallen behind the employment market and caused some concern. On top of this is of course the year end and traders will be looking to unwind positions as the yield returns relative to the USD has diminished in the long run.
AUDUSD traders have been stuck ranging so far, but the bearish trend is still a real threat there. The 20 day moving average is a clear indicator of this as bullish candles are closing below this key level at present. Support at 0.7564 has held out thus far, but the market could easily extend further to 0.7500 which would be a key level for most traders. If the bulls return to the market then a jump to 0.7624 and 0.7687 are likely on the cards, nevertheless it would take some positive words from the Reserve Bank of Australia to get things jumping that high.
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