Yesterday morning the pound fell on headlines that Russia was going to retaliate and expel British diplomats. This came in response to the UK’s decision to oust Russian diplomats after Moscow refused to explain how a nerve agent was used on a former spy and his daughter in the UK. However, once UK’s allies also condemned Russia, the pound started to recover. In a joint statement, the leaders of France, Germany, US and the UK blamed Russia for the attempted murder of former double agent Sergei Skripal. Sterling will be in focus as investors’ attention turns back to the Brexit transition deal and UK fundamentals. Brexit Secretary David Davis will travel to Brussels this weekend and will meet EU’s chief negotiator Michel Barnier on Monday. The UK government is optimistic to secure a deal for a two-year grace period, which would bridge the gap between the UK leaving the EU and a new regime of trading rules and regulations getting figured out. However, it remains to be seen if they will be able to secure a deal and if so on what terms. A lot of differences between the UK and EU still remain, particularly over the Irish border issue. Meanwhile next week we will also have the latest UK CPI, wages and retail sales data to look forward to, and the Bank of England’s latest policy decision. The BoE is unlikely to have changed its outlook much from its previous meeting, so we won’t be expecting any fireworks from the rate statement. Still, next week’s economic data releases and Brexit negotiations should provide plenty of volatility for the pound.
GBP/CHF remains fundamentally and technically supported
If sterling were to climb higher next week then its best bet would be against a weaker currency like the Swiss franc. The franc weakened a little yesterday after the Swiss National Bank re-iterated its commitment in keeping monetary policy extremely loose and intervening in the FX market if necessary to weaken the currency. Thus, the GBP/CHF remains fundamentally supported, in our view. Meanwhile from a technical perspective, the outlook remains positive, too. This view was reinforced yesterday by the market’s refusal to hold below the prior day’s low, when it had formed what was a bearish-looking inverted-hammer candle. The breakdown only lasted for a brief moment before price rallied to hit a new high on the week. Thus the sellers were once again trapped. The path of least resistance is clearly to the upside, as things stand. If there is acceptance above the prior resistance level of 1.3240 now, then the next potential upside targets are at 1.3380 followed by the psychologically-important level at 1.3500, which comes in just above the previous high of 1.3490. However, if price fails to hold above 1.3250 and the next support at 1.3145 also gives way, then this would invalidate the bullish idea in the short-term outlook. In this case, a possible drop to the next support at 1.3070 would become highly likely.
Trading leveraged products such as FX, CFDs and Spread Bets carry a high level of risk which means you could lose your capital and is therefore not suitable for all investors. All of this website’s contents and information provided by Fawad Razaqzada elsewhere, such as on telegram and other social channels, including news, opinions, market analyses, trade ideas, trade signals or other information are solely provided as general market commentary and do not constitute a recommendation or investment advice. Please ensure you fully understand the risks involved by reading our disclaimer, terms and policies.
Recommended Content
Editors’ Picks
AUD/USD holds above 0.6500 in thin trading
The Australian Dollar managed to recover ground against its American rival after AUD/USD fell to 0.6484. The upbeat tone of Wall Street underpinned the Aussie despite broad US Dollar strength and tepid Australian data.
EUR/USD comfortable below 1.0800 lower lows at sight
The EUR/USD pair lost ground on Thursday and settled near a fresh March low of 1.0774. Strong US data and hawkish Fed speakers comments lead the way ahead of the release of the US PCE Price Index on Friday.
Gold price finishes Thursday’s session set to reach new all-time highs
Gold price rallied during the North American session on Thursday and hit a new all-time high of $2,225 in the mid-North American session. Precious metal prices are trending higher even though US Treasury yields are advancing, underpinning the Greenback.
Bitcoin price extends retreat from $69K as old whales shift their holdings to new whales
Bitcoin price continues to move further away from the $69,000 threshold, gaining ground as BTC bulls hope for a retest of the $73,777 peak. This is because of the general assumption that clearing this blockade would set the tone for a reach higher, marking a new all-time high.
Bears have been standing before a steamroller so far this year
Despite a pushback on rate cuts from Christopher Waller, and what was supposed to be cautious trading sentiment ahead of critical US inflation data released later on Friday, the S&P 500 rose on Thursday, marking its best first-quarter performance in five years.