EUR/GBP: Downside limited by ATRs and major support levels, 0.8643/55 swing lows

• While we await the pages turned over for the next chapter in the Brexit saga,  EUR/GBP has made a fresh low due to a sell-off in the euro and a spike in the greenback. 
• DXY rallies to a fresh high in North American trade at 94.64 despite a 34th day in the partial shutdown and flying blind with respect to US data, (Commerce Department remains closed ahead of Fed Jan meeting (expected to stand pat)).
• EUR/USD pierces 1.13 the figure to the downside. 

EUR/GBP has fallen to a fresh swing low on the short term charts, extending its 2019 decline following the ECB dovish outcome and tweak to its statement that theoretically raises the possibility of pushing changes to monetary policy down the line, citing risks to the growth  as being tilted to the downside – mostly because of persisting uncertainties, which may ultimately weigh on confidence.

While Draghi appeared reluctant to steer towards new policy measures, the markets are of the opinion that the Council may need to act if the economic weakness persists, and there is plenty of that out there. Brexit and US/Sino political risks take the biscuit, for now, (Venezuela is also on the approach which brings oil markets into the picture, adding to the general macro growth uncertainties).

Sterling takes the spotlight

Meanwhile, sterling has taken the spotlight this week with an impressive bid which puts the pound on a peddle stool and on the verge of a break of the 200-D SMA vs the greenback, eyeing a 38.2% Fibo retracement of the mid-Dec decline. It also sees EUR/GBP en route to the support of the year and a half long sideways channel at 0.8643/55 swing lows. 

Sterling is better bid on the notion that a hard Brexit will be avoided, or at least set back beyond 29th March which may give the BoE some wiggle room to respond to inflation pressures, borne either from the demand or supply end.

The next risk comes on turning the page over to the next chapter of the Brexit saga following  Andrea Leadsom, leader of The House Commons, confirming that a statement and a motion of the government's next steps will be tabled this Monday. A full days debate on the motion will take place on Tuesday the 29th Jan subject to the agreement of the house.   However, the opposition and cross-party MPs have been tabling amendments to May's motion in a bid to force the government to change direction. 

Several different courses have been proposed in various amendments, and if successful, while they would not be binding on the government,  support for any of them would put political pressure on Theresa May to follow their direction 

We now move into the 11th hour of Brexit negotiations and Andrea Leadsom, leader of The House Commons, has confirmed that a statement and a motion of the governments next steps will be tabled on Monday. A full days debate on the motion will take place on Tuesday the 29th Jan subject to the agreement of the house.   

The opposition and backbench MPs have been tabling amendments to May's motion in a bid to force the government to change direction. Several different courses have been proposed and, in normal circumstances, one would be selected by the Speaker for 90 minutes of debate. The amendments, if successful, would be binding on the government, although support for any of them would put political pressure on Theresa May to follow their direction.

However, the one to watch is from Yvette Cooper. If her amendment was successful, and she then managed to get MPs to approve her bill, it would become law and so place an obligation on the government.

Labour MP Yvette Cooper's amendment

The amendment is as follows (BBC reports):

Attempts to rule out the UK leaving the EU without a formal deal by allowing parliamentary time to pass a new law.
The bill to bring in the new law would require Theresa May to seek to postpone Brexit day (currently 29 March) until 31 December, if MPs do not approve her deal by 26 February.

The prime minister would do this by asking the EU to agree to extend the two-year limit on Article 50 - the mechanism paving the way for the UK to leave the EU.

With the backing of senior Conservative backbenchers such as Nicky Morgan and Oliver Letwin, former Lib Dem health minister Norman Lamb and Plaid Cymru's Ben Lake, it is thought the initial amendment has a good chance of success.

EUR/GBP levels

Bears eye a test of the key support line along the 0.8643/55 fractal swing lows. However, sterling needs to break the 200-D SMA vs the greenback and resistance at the 38.2% Fibo could be a tough nut to crack unless positive fundamentals kick in and take the pair over the line. From a techncial basis, the cross's daily ATR at 73 pips offers room to go and the price is now back below the Sep 2018 trendline resistance again and deeply within the bearish channel. However, we are now in wait and see mode with the ECB out of the way, awaiting 29th Jan and US data is scarce due to the US gov. shutdown. GBP/USD ATR of 120 leaves the downside vulnerable although the DXY has likely reached its highs for the session, again, accord to the ATR for 50 pips - it has already rallied 64 pips. 

"The market stays directly offered below the 200-day ma, and only above here allows for a move to the 55-day ma at 0.8907 and this together with the October 0.8941 high are expected to contain the topside,"

analysts at Commerzbank argued.