(MENAFN- DailyFX) GBP/USD, EUR/USD Talking Points:
- , and today has brought another unexpected twist with the resignation of Brexit Minister, Dominic Raab. This follows a small note of success yesterday after Theresa May gained support from her cabinet for a draft of a proposal which she is expected to pitch to Parliament later today. This remains a very fluid situation, so expect continued changes and, well, the unexpected.
- Italy's deadline for a revised budget has gone and went, and the Italian government refused to modify their budget targets despite the October rejection from the EC. The big question now is what the EC does in response: Markets are in unchartered territory here as the EC now has to either a) cave to Italy or b) do something to provoke compliance. Neither option seems attractive for the EC, and the second could carry large consequences when facing off with the continent's third largest economy, currently being led by a government largely elected on a Euro-skeptic platform.
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Raab Resigns, Pressure Stays on May, Brexit Remains Unclear
Another day, another twist in the Brexit saga. , setting up for a pitch to Parliament later today. But, before that could happen, a couple of high-profile resignations showed up, including that of Brexit minister, Dominic Raab. This is a big deal, and the comments he made on his way out were rather troubling. , and the quote said, 'No democratic nation has ever signed up to be bound by such an extensive regime, imposed externally without any democratic control over the laws to be applied, nor the ability to decide to exit the arrangement.
News of Mr. Raab's resignation sent the British Pound spiraling down to fresh November lows, catching a bit of a bounce off of the 1.2750 psychological level.
GBP/USD Hourly Price Chart: Pound Breaks Down on News of Raab Resignation Chart prepared by
As I had looked at over the past few days, as prices have been caught in a bout of mean reversion for almost four months now. August saw support play-in from the 23.6% of the Brexit move, and late-October produced a higher-low after bears shied away from a re-test. Focus is now back on to this zone: If buyers come in to pose another higher-low, reversal strategies could remain attractive. But if that low gets taken out, short-side breakouts and the eventual return of bearish strategies may soon be in the cards.
GBP/USD Daily Price Chart: Three Months of Grind After 23.6% Fibonacci Support Chart prepared by
Italy Snubs Brussels, Retains Rejected Budget
The drama around Brexit may be garnering some attention away from the European Union, as . No revised budget was submitted, and the Italian government has chosen to stick to the previous budget targets despite the fact that the plan had already been rejected by the European Commission last month. That rejection was unprecedented, so we're in unchartered territory here: But the big question now is whether the EC passes on fines to Italy. Volleys have been lobbed from each side via the media, but it's still rather unclear how Brussels will choose to move forward here.
For its part, in the Euro has remained stable over the past few days despite these fundamental headwinds. . Sellers pulled up shy ahead of a key Fibonacci level at 1.1212, which is the 61.8% retracement of the 2000-2008 major move.
EUR/USD Monthly Price Chart Chart prepared by
After the pair posed that downside break below 1.1300 . I focused in on prices at 1.1300 and 1.1355 for lower-high resistance potential, and each of those prices have had some level of pull over the past few days. But, at this point, buyers of this two-day move haven't yet relented despite a strong show of resistance inside of 1.1355. The door can remain open for short-side strategies here, as USD-weakness may simply be more attractive elsewhere.
EUR/USD Four-Hour Price Chart Chart prepared by
NZD/USD: Fresh Three-Month Highs After Support Check
In a sign that not every currency is under some form of pressure, NZD/USD has just worked up to a fresh three-month high after an earlier-week support check. , and that potential continues as buyers have continued to push in the pair. Resistance is now showing at .6819, which is the 23.6% Fibonacci retracement of the 2014-2015 sell-off in the pair. This price had helped to hold the high around RBNZ last week after a quick test. That pushed prices down to the support zone that I've been following around .6725, and buyers have taken-control since.
NZD/USD Eight-Hour Price Chart: Fresh Three-Month Highs After Earlier-Week Support Test Chart prepared by
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--- Written by James Stanley, Strategist for DailyFX.com
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