Brexit headlines drive GBP higher – 1.3350 about to break?

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  • 05.03.2019
  • Comments Off on Brexit headlines drive GBP higher – 1.3350 about to break?
<p><a href=”https://admiralmarkets.com/analytics/traders-blog/brexit-optimism-usd-disappoints”><img style=”width:auto;” class=”img-responsive” src=”https://fxmedia.s3.amazonaws.com/articles/remote/9534294d13b5751f336d3a38b751a1e6.png” rel=”” alt=”New Brexit developments provide surprises for the GBP” style=””></a></p><h2>Economic Events March 4 – March 8, 2019:</h2><h2><a href=”https://admiralmarkets.com/analytics/traders-blog/brexit-optimism-usd-disappoints”><img style=”width:auto;” class=”img-responsive” src=”https://fxmedia.s3.amazonaws.com/articles/remote/efdc47ce3122d7b90854515f32b74f71.png” rel=”” alt=”Forex economic events calendar”></a> </h2><p><em>Source: Economic Events Calendar March 4-8, 2019 – </em><em><a href=”https://admiralmarkets.com/analytics/forex-calendar”>Admiral Markets’ Forex Calendar</a></em></p><p><br></p><h2>DAX30 CFD</h2><p>As we predicted in our <a href=”https://admiralmarkets.com/analytics/traders-blog/usdjpy-bucks-correlation”>weekly market outlook last Monday</a>, the downside in the DAX30 CFD was limited. But over the last week, we expected ongoing consolidation with a slight drift upwards, towards and above last December’s highs. </p><p>And the DAX30 CFD delivered as expected. With that in mind, the overall picture hasn’t changed. The focus on the upside is still around 11,600, even after the week closed above it. The question remains as to whether this is a sustainable break. If so, a next potential target lands around the March 2018 lows of around 11,700/50 points. </p><p>On the downside, a drop back below 11,370/400 points could result in further weakness, plummeting to 11,000 points and below. </p><p>From a fundamental perspective, the primary focus will surely be on the ECB rate decision. </p><p>Since we already know the ECP policy makers have a pessimistic outlook on the eurozone economy, thanks to the February 21 ECB policy meeting’s minutes, where they asked for swift preparations to give banks more long-term loans. Thus, markets may already expect a dovish touch to the coming ECB statement this Thursday. </p><p>In our opinion, taking into account the latest Brexit headlines (particularly of Labour leader <a href=”https://www.bloomberg.com/news/articles/2019-02-25/corbyn-bows-to-pressure-and-agrees-to-back-new-brexit-referendum” target=”_blank”>Corbyn agreeing on backing a second EU referendum</a>), chances are good that the ECB will go for a ‘wait-and-see’-approach – which could be interpreted as fairly hawkish, leaving the DAX30 CFD vulnerable to a sharp pullback against the December 2018 highs. </p><p><a href=”https://admiralmarkets.com/analytics/traders-blog/brexit-optimism-usd-disappoints”><img style=”width:auto;” class=”img-responsive” src=”https://fxmedia.s3.amazonaws.com/articles/remote/f76093eceeeae1dbd3ee2ad55ba285d6.png” rel=”” alt=”DAX 30 CFD daily chart” style=””></a></p><p><em>Source: Admiral Markets </em><a href=”https://admiralmarkets.com/trading-platforms/metatrader-5″><em>MT5</em></a><em> with </em><a href=”https://admiralmarkets.com/trading-platforms/metatrader-se”><em>MT5-SE Add-on</em></a><em> DAX30 CFD daily chart (between November 23, 2017, to March 1, 2019). Accessed: March 1, 2019, at 10:00pm GMT – Please note: Past performance is not a reliable indicator of future results, or future performance.</em></p><p>Check out Admiral Markets’ most competitive conditions on the <a href=”https://admiralmarkets.com/start-trading/contract-specifications/instrument/dax30″>DAX30 CFD</a> and start trading on the DAX30 CFD with a low 0.8 point spread offering during the main Xetra trading hours! In 2014, the value of the DAX30 CFD increased by 2.65%, in 2015, it increased by 9.56%, in 2016, it increased by 6.87%, in 2017 it increased by 12.51%, in 2018, it fell by 18.26%, meaning that after five years, it was up by 10.5%.</p><p><br></p><h2>US Dollar</h2><p>Until last Thursday, it seemed as if a weekly close below 96.00 points for the USD was imminent. But then, US GDP data for Q4/2019 came in at up 3.1% year-over-year, indicating the highest growth rate since Q2/2015.</p><p>So, the USD closed the week nearly unchanged and, that said, the overall picture in the USD hasn’t changed as well.</p><p>From a fundamental perspective, taking into consideration the last FED Minutes (which showed that there was a consensus among voting FED members to end the reduction of the 4 trillion USD balance sheet by the end of the year), the middle-term picture for the USD stays bearish. </p><p>Taking into consideration the 58% weight of the Euro on the USD index’ future, and chances of a neutral ECB (for details on the ECB, read the Euro section below), chances still seem good that the USD index will soon drop, and close below 96.00 points. </p><p>Nevertheless, from a technical perspective, only a break below 95.00 points could darken the picture – until then, the mode stays neutral between 95.00 and 97.70 points. </p><p><a href=”https://admiralmarkets.com/analytics/traders-blog/brexit-optimism-usd-disappoints”><img style=”width:auto;” class=”img-responsive” src=”https://fxmedia.s3.amazonaws.com/articles/remote/6f2d4866db8b8994237718a4bb97e823.png” rel=”” alt=”Weekly OHLC chart” style=””></a></p><p><em>Source: Barchart</em> <em>- U.S Dollar Index – Weekly Nearest OHLC Chart (between January, 2016, to January, 2019). Accessed: March 1, at 10:00pm GMT – Please note: Past performance is not a reliable indicator of future results, or future performance.</em></p><p>Don’t forget to <a href=”https://admiralmarkets.com/education/webinars/admiral-markets-weekly-market-outlook-1″>register</a> for the weekly webinar “Admiral Markets’ Weekly Market Outlook” with Jens Klatt, every Friday at 12pm London time. It’s your opportunity to follow Jens as he explores the weekly market outlook in detail, so don’t miss out!</p><p><br></p><h2>Euro</h2><p>In the coming days, the main focus among market participants will surely be on Thursday’s ECB rate decision.</p><p>As already discussed in the DAX30 CFD section above, and thanks to February 21’s ECB minutes, it is clear that ECB policy makers are pessimistic about the eurozone economy, and asked for swift preparations to give banks more long-term loans if deemed necessary. This in mind, markets may already expect a dovish touch to the ECB statement next Thursday. </p><p>After the latest Brexit headlines (particularly regarding Labour leader <a href=”https://www.bloomberg.com/news/articles/2019-02-25/corbyn-bows-to-pressure-and-agrees-to-back-new-brexit-referendum” target=”_blank”>Corbyn agreeing on backing a second EU referendum</a>), chances seem good that the ECB will favour a ‘wait-and-see’ (or neutral) approach – which could be interpreted as fairly hawkish.</p><p>And even if EUR/USD stays neutral from a technical perspective, between 1.1200 and 1.1600 on a daily chart, such a monetary policy stance could result in a push upwards and towards 1.1500, instead of a re-test of the region around 1.1200. </p><p>But before Euro bulls become overly excited, they should remember that ECB member Olli Rehn said that the ECB should be ready “<a href=”https://in.reuters.com/article/ecb-policy-rehn/ecb-must-be-prepared-in-case-growth-outlook-sours-rehn-idINKCN1QA1FY” target=”_blank”>to do whatever it takes</a>” in the event things deteriorate further, hinting that a “dovish surprise” could be around the corner and then act as the beginning of some heavier Euro selling. </p><p><a href=”https://admiralmarkets.com/analytics/traders-blog/brexit-optimism-usd-disappoints”><img style=”width:auto;” class=”img-responsive” src=”https://fxmedia.s3.amazonaws.com/articles/remote/77152e4d84efa464686efe423196e337.png” rel=”” alt=”EUR/USD daily chart” style=””></a></p><p><em>Source: Admiral Markets MT5 with MT5-SE Add-on EUR/USD Daily chart (between November 29, 2017, to March 1, 2019). Accessed: March 1, 2019, at 10:00pm GMT – Please note: Past performance is not a reliable indicator of future results, or future performance.</em></p><p>In 2014, the value of the EUR/USD fell by 11.9%, in 2015, it fell by 10.2%, in 2016 it fell by 3.2%, in 2017 it increased by 13.92%, 2018 it fell by 4.4%, meaning that after five years, it was down by 16.5%.</p><p><br></p><h2>GBP</h2><p>You may have noticed that we haven’t drawn a positive picture for the GBP for the last few weeks, due in part to the mess surrounding the UK parliament Brexit negotiations and the deal UK prime minister Theresa May negotiated with Brussels. </p><p>As a reminder: due to the tight trading ban between the UK and Germany, <a href=”https://admiralmarkets.com/analytics/traders-blog/fed-flexible-balance-runoff-euro-profit-unlikely”>we pointed out at the beginning of last month</a> that there are still hopes that a solution can be found, and concessions from the EU will be made. And in this context, the focus lies on a last-minute summit set for March 21 and 22, just a week before the UK is set to leave the EU, on March 29. </p><p>But the GBP/USD pushing to new yearly highs and short-term above 1.3300 nevertheless came as a surprise. Over the last week, news hit the wire that not only does UK prime minister May now favour a delay of the Brexit to avoid a ‘No-deal-exit’, but also <a href=”https://www.bloomberg.com/news/articles/2019-02-25/corbyn-bows-to-pressure-and-agrees-to-back-new-brexit-referendum” target=”_blank”>Labour party leader Corbyn now agrees to back a second EU referendum</a>. </p><p>It is pure speculation to say with certainty that such a vote will happen, but the reaction of the GBP index to all this news clearly shows a renewed hope that a Soft-Brexit, or probably no Brexit at all, will take place – which can be generally considered bullish for Pound Sterling. </p><p>Together with potential USD weakness, a push above 1.3350 becomes a serious option, allowing for further gains up to 1.3600/3650 a possibility. </p><p><a href=”https://admiralmarkets.com/analytics/traders-blog/brexit-optimism-usd-disappoints”><img style=”width:auto;” class=”img-responsive” src=”https://fxmedia.s3.amazonaws.com/articles/remote/bc7c69ffabc596d0560ea86717e290fa.png” rel=”” alt=”GBP/USD daily chart” style=””></a></p><p><em>Source: Admiral Markets MT5 with MT5-SE Add-on GBP/USD Daily chart (between November 29, 2017 to March 1, 2019). Accessed: March 1, 2019, at 10:00pm GMT – Please note: Past performance is not a reliable indicator of future results, or future performance.</em></p><p>In 2014, the value of the GBP/USD fell by 5.9%, in 2015, it fell by 5.4%, in 2016, it fell by 16.3%, in 2017, it increased by 7.4%, in 2018, it fell by 5.6%, meaning that after five years, it was down by 22.9%.</p><p><br></p><h2>Gold </h2><p>After the pullback towards the potential long-trigger around 1,323/325 USD/ounce during the first half of last week, some market participants were surely starting to wait for a clear confirmation before entering long-engagements aiming for a break above 1,360 USD. </p><p>Well, with the very weak weekly close below 1,300 USD, the technical picture hashas some doubts as to whether a push upwards to 1,360 USD is really going to happen. </p><p>The initial driver for Gold’s push downwards came with the very solid US GDP data, which came in last Thursday at up 3.1% year-over-year, pointing to the highest growth rate since Q2 2015 – which also pushed 10-year US Treasury yields back towards 2.75%. </p><p>While the fundamental picture for the US economy hasn’t significantly changed since last Thursday’s dataset. That said, Gold long engagements are still to be favoured over the medium term, a break above 2.75% in 10-year yields could push Gold even lower. </p><p>So, while we still favour the long side in Gold, the technical picture does not currently agree with us anymore – we advocate standing on the sidelines and waiting until the overall technical picture has improved: </p><p><a href=”https://admiralmarkets.com/analytics/traders-blog/brexit-optimism-usd-disappoints”><img style=”width:auto;” class=”img-responsive” src=”https://fxmedia.s3.amazonaws.com/articles/remote/5d6706b2a5b9a8cf6a1c023f62c0acb8.png” rel=”” alt=”Gold daily chart” style=””></a></p><p><em>Source: Admiral Markets MT5 with MT5-SE Add-on Gold Daily chart (between December 13, 2017 to March 1, 2019). Accessed: March 1, 2019, at 10:00pm GMT – Please note: Past performance is not a reliable indicator of future results, or future performance.</em></p><p>In 2014, the value of Gold fell by 1.7%, in 2015, it fell by 10.4%, in 2016, it increased by 8.1%, in 2017, it increased by 13.1%, in 2018, it fell by 1.6%, meaning that after five years, it was up by 6.4%.</p><p><a href=”https://admiralmarkets.com/trading-platforms/metatrader-5″><a href=”https://admiralmarkets.com/analytics/traders-blog/brexit-optimism-usd-disappoints”><img style=”width:auto;” class=”img-responsive” src=”https://fxmedia.s3.amazonaws.com/articles/remote/a3e93a3e856a7a5f47aa3de7960af95a.png” rel=”” alt=”Download MetaTrader 5 and begin trading today!” style=””></a></a></p><p><em>Disclaimer: The given data provides additional information regarding all analysis, estimates, prognosis, forecasts or other similar assessments or information (hereinafter “Analysis”) published on the website of Admiral Markets. 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