CALM BEFORE THE STORM AS STERLING HALTS DECLINE
Yesterday, sterling dropped sharply after Brexit Minister Dominic Raab resigned. This was the biggest drop since the day the UK voted to leave the EU. In the Asian session, sterling was little moved as traders waited for an indication of what will happen today. The chance of a no-Brexit deal is still a possibility as traders expect parliament to vote down the proposal by Theresa May’s government.
The euro was little moved in the Asian session ahead of important data from the EU. The region will release its consumer prices data. This data is expected to show that consumer prices remained unchanged in October. The CPI is expected to remain at 2.2% while the core CPI is expected to remain at 1.1%. This data will likely not change the guidance of the ECB. In the last meeting, the bank reiterated its intention of ending quantitative easing in December. The bank also said that a change of interest rates will likely happen through the summer of 2019.
The price of crude oil remained at extremely low levels after the EIA released the crude inventories. The numbers showed that inventories for the week rose by 10.27 million barrels. This was much larger than the 3.18 million barrels that traders were expecting and came a day after the API number showed inventories at 5.7 million barrels. The increased supply has triggered Saudi Arabia to consider supply cuts starting from December.
The EUR/USD pair was relatively unchanged in the Asian session today. It is trading at 1.1335, which is along the 38.2% Fibonacci Retracement level. This week, the pair has seen some relative gains of 1.3%. The RSI is at 53.6 while the Bulls Power indicator has lost momentum. This consolidation could lead to more volatility today or in the days ahead. If the pair continues moving up, it will likely test the 1.1350 resistance level and if it moves down, it will test the 1.1320 level.
After yesterday’s plunge, the GBP/USD took a break in the Asian session as traders waited for more news on Brexit. The pair is trading at 1.2790, which is slightly above yesterday’s low of 1.2722. It is also above the low of 1.2630, which is an important support level. The RSI has moved from yesterday’s low of 28 to the current 42. If the pair resumes the decline, traders should watch out for this support. This is because further declines will likely take the pair to 1.2500. There is also a possibility that the pair will reverse when it reaches this level.
The price of WTI crude oil moved slightly higher in the Asian session but remained near the lowest low since November this year. This was a minor support level as shown on the daily chart below. The double exponential moving average indicators point to a sustained downward trend. The RSI is currently at 24, which is above yesterday’s low of 14. The XTI/USD pair is likely to continue moving lower. If it does, it will move to the 50 support level.