Renewed optimism inflated pound ahead of key parliamentary vote on Brexit plat
Cable remains bid in early European trading on Tuesday and holding under new two-week high at 1.3288, posted in early Asian session in extension of Monday’s 1.6% advance, the biggest one-day gains since 1 Nov.
The pound was boosted by renewed optimism on potential Brexit deal approval after PM May agreed with European commission on some changes to her plan, ahead of vote in the parliament later today.
UK PM May managed to get some concessions from the EU on Irish backstop which was the main obstacle in the latest negotiation and now everything will be in the hands of UK parliament.
European Commission Chief Juncker said that this is the last chance and deal will be reached or there will be no Brexit.
Volatility risk is at the highest since Brexit vote as uncertainty whether the plan will be approved or will be voted down rises.
Two scenarios are circulating in the market, the first one, where May will manage to reverse 15 Jan vote defeat and the second, on repeated parliament’s rejection of the plan.
The first scenario is expected to stabilize the situation and lead towards smooth final divorce on 29 Mar.
In case the plan does not pass, the parliament will vote on amendments on Wednesday and will likely rule-out Brexit without deal.
The next step will be another vote on Brexit delay on Thursday, which would open scenario for a second Brexit referendum or a general election.
Daily studies are gaining bullish momentum, with indicators pointing higher and MA’s in positive setup, being supportive for further advance, as Monday’s bullish outside day, underpins the action.
Fresh bulls probed again through the base of thick falling weekly cloud, following repeated rejection in past two weeks, with fresh bullish signal expected on eventual break and close within the cloud.
Bulls eye 2019 high at 1.3349 (27 Feb), violation of which would expose barrier at 1.3386 (50% retracement of 1.4376/1.2397 fall).
Broken 10SMA (1.3181) offers initial support, ahead of rising 20SMA (1.3090) with 200SMA and daily cloud continuing to underpim.
A batch of UK economic data, due in a while, would generate fresh signals, as traders eye monthly GDP (0.2% f/c vs -.04% prev); Manufacturing Production (Jan 0.2% f/c vs -0.7% prev) and UK Jan Trade Balance release, to get more clues about the strength of the UK economy.
Res: 1.3248; 1.3288; 1.3362; 1.3386
Sup: 1.3181; 1.3134; 1.3090; 1.3055