Market Analysis: 3 October, 2016

Australia Interest Rate

by Christala Parmaxi

Overview

Brexit Timetable

The UK Prime Minister pulled the trigger for the Brexit timetable during her first major speech on Brexit yesterday. Theresa May said that article 50 will be triggered “no later than the end of March 2017”; taking into consideration the two years’ expiry time of the Lisbon Treaty agreement, the UK should be a non-EU country by March 2019. Theresa May said that UK will be a fully independent sovereign country and she will insist on taking full control of immigration while refusing to accept the jurisdiction of the European Court of Justice. It seems that UK is going for a hard Brexit; the Pound reacted to the speech negatively by opening with a gap down against the most of its counterparties today.

European Banks Updates

Meanwhile, the uncertainty on the European Financial Markets is widening since ING plans to cut 5,800 jobs in Belgium and the Netherlands to reduce costs as its digital transformation is optimizing. Meanwhile Deutsche Bank announced its plans for cutting 1,000 jobs while its share closed up 6.8% on Friday. Despite the uncertainty in the European Banking sector, Euro closed higher against the US Dollar and the British Pound on Friday.

Economic Calendar

Today we are expecting the announcement of UK September’s Manufacturing PMI, which is predicted lower than August’s, at 52.1 against 53.3 respectively. Later during the US session, September’s US ISM Manufacturing Employment is expected higher than last month’s at 50.3. Tomorrow, during the Asian morning session, the Reserve Bank of Australia is going to have its policy meeting and interest rate decision, which is widely expected to remain stable at 1.5% after the latest statements of the Governor for the wait and see strategy.

Moreover, The Governor of the Reserve Bank of New Zealand Graeme Wheeler is going to give a speech tomorrow morning at 04:30 am server time. The spotlight of the week will be the NFP report on Friday, since it is one of the remaining three Non-farm Payroll reports before Fed’s December meeting.

Australia Interest Rate

Australia Interest Rate

Technical View

EURGBP

The Euro is still moving within a symmetrical triangle against the Dollar, while the Cable plummeted to 7-weeks’ low. The movement of these two pairs triggered interest on EURGBP, which is trading on a 3-year high today, with the next valid resistance level laying at 0.88. The monthly chart is worth our attention since MACD has just crossed its equilibrium level while RSI is moving upwards to its overbought level. Also, the candlesticks of the months following the Brexit referendum were all bullish so far.

EURGBP

EURGBP

The 4-hour chart is trading on a sharp uptrend while the Average Directional Index is on positive territories. There is likelihood for a correction down to the level of today’s gap but then we could expect a further upside move. The first valid support level is close to the gap of 0.867 and the next one near the psychological level of 0.86.On the flip side, the first valid resistance is today’s high at 0.875.

EURGBP

EURGBP

 

EURUSD

The main currency is still trading within a symmetrical triangle while SMA50 crossed SMA100 and SMA200 to the upside. A confirmation of the price on a closing basis, above the triangle, would verify a bullish continuation of the movement.

 

EURUSD

EURUSD

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