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Phase One Trade Deal – Done? Brexit Victory. PMI. EUR/USD. USD/JPY. GBP/USD

Dec 16 2019, 09:54 PM (+06) |


EUR/USD on the Daily TF rallied on Friday as Conservative Boris Johnson secured victory with a massive majority in parliament. By Friday afternoon Conservatives had 365 seats out of 650, Labor had 203. This is the biggest win since Margaret Thatcher 32 years ago. 

The pair hit both of our resistance targets, reaching a high of 1.11966. The pair has since lost some of its initial bullish momentum as the United States announced that a phase one agreement has been met with China. The ominous December 15th deadline, which was scheduled for increased tariffs passed without incident. The only problem remains, again this is all verbal. The official date and place of the Phase One deal signing is still being negotiated. President Donald Trump did mention on Twitter that the United States and China will start working on a Phase Two deal immediately, not waiting for the 2020 US presidential elections. Markets and investors are likely to stay cautious until the Phase One deal is on paper and signed, keeping track of developments and statements from both sides. 

The pair is trading slightly below the 50% Fibo level around 1.11410. The Eurozone reported worse than expected Manufacturing PMI for December. The French Manufacturing PMI was reported at 50.3 below the 51.5 forecast, the German was 43.4 below the 44.5 forecast, and the Eurozone was 45.9 below the 47.3 forecast. Next month’s readings are going to carry more substance as Brexit uncertainties are now on the backburner. 

At 1 pm GMT, there will be a speech by Vice-President of the European Central Bank Luis de Guindos, listen for clues on monetary policy. At 2:45 pm GMT, the United States will release its Manufacturing PMI, which is expected to remain the same at 52.6. 

A bullish MACD has increased, while the Parabolic SAR points up, and the RSI is within range at 62.90. 

Resistance: R1 200EMA 1.11626, R2 1.11996, R3 1.12413.
Support: S1 23.6% Fibo 1.11240, S2 38.2% Fibo 1.10772, S3 50% Fibo 1.10393.  

GBP/USD on the Daily TF is also enjoying a rally. As we mentioned earlier, Conservative Boris Johnson won the UK General Election by a landslide.  The pair hit both of our resistance targets, creating a high at 1.35149, now trading slightly below 61.8% Fibo around 1.33672.  The re-elected Prime Minister will introduce the Brexit bill to the House of Commons on Friday. The current deadline for the UK to leave the bloc is January 31st, 2020 and the Brexit transition period deadline is December 31st, 2020. 

We are seeing a continuation in deterioration in Manufacturing PMI, which was reported today at 47.4 below the 49.3 forecast. The Services sector is also weakening, reported at 49 below its 49.6 forecast. Pay attention to the BoE Financial Stability Report today at 5 pm GMT, this Thursday the Bank of England will make their decision on the interest rate which has been held at a steady 0.75% throughout 2019. 

Resistance: R1 61.8% Fibo 1.34529, R2 1.36137, R3 1.37505.
Support: S1 50% Fibo 1.31675, S2 1.29732, S3 38.2% Fibo 1.28821.

USD/JPY on a Daily TF has been trading around the 200EMA since October 15th 2019. The pair has broken above the 61.8% Fibo level and currently trading around 109.445. 

The MACD line has crossed the Signal line upward, and the Parabolic Sar reversed and is pointing up as well. 

Resistance: R1 109.727, R2 110.244, R3 110.698
Support:   200EMA 108.785, S2 50% Fibo 108.423, S3 107.886.

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