The Dollar has firmed up while the Yen has underperformed ahead of the London interbank open. The solid US jobs report last Friday and expectations for a strong corporate earnings season have been buoying Equities, although Chinese share markets have continued to underperform and there is a palpable underlying sense that the US-led trade way with major economies is curtailing bullish sentiment.
The Pound took a hit late yesterday, just before and after the London closing, on news that British Foreign Secretary Boris Johnson resigned in protest of the “soft Breixt” approach the Cabinet voted in on Friday. This followed the resignation of Brexit Secretary David Davies, and there concern is that this could develop from the politically problematic, from the perspective of Prime Minister May, to a party crisis and leadership challenge, with Johnson the challenger.
Cable dove from levels above 1.3300 to a low of 1.3188, since settling around the 1.3230 mark. The UK100 is underperforming despite a weaker Pound, amid political uncertainty and amid rumors of a challenge to PM May, who had to replace 2 ministers in a row over her Brexit vision.
UK100 on yesterday’s closing moved above 20 and 50-Day MA, but it significantly moved above the downchannel identified since mid May. If momentum remains positive for a 2nd onsecutive day, then the neckline of the downchannel at 7640.00-7667.00, could provide support to the asset for the potential upwards movement. Meanwhile, yhe technical indicators confirm that the negative momentum decreases, with MACD lines picking up to neutral zone above signal line and RSI sloping slightly above neutral.
Additionally, the perfect confirmation of positive momentum could come on the break of the immediate Resistance at the confluence of latest Daily up Fractal and 50% Fib level since May’s drift, at 7700.00. To the downside, the break of the immediate Support at the 20-Day MA, could suggest a retest of June’s low.
The UK government remains focus on infighting while the time for a deal is running out and even May’s “soft Brexit” option is unlikely to pass unchallenged in Brussels. Today’s calendar focuses on UK trade and production data as well as German ZEW investor confidence.
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