Sterling falls as senior EU official warns of no-deal Brexit

The Australian dollar pared back earlier gains as the market digested the latest interest rate decision by the Reserve Bank of Australia (RBA). The bank decided to leave interest rates unchanged for the eighth consecutive month. It also left its yield-curve control program intact. In the statement, Governor Philip Lowe also said that the country’s unemployment rate will peak sooner than expected. He also hinted that the bank was prepared to offer more easing soon. Earlier on, data released by the bureau of statistics showed that exports fell by 4% while imports rose by 2%, pushing the trade surplus to A$2.6 billion.

The British pound also erased earlier gains as the market reacted to a speech by Boris Johnson. In the speech, he said that he was hopeful that the country will reach a deal with the European Union on Brexit. He also unveiled the plan to shift the country’s energy industry to wind in the next 9 years. The pound declined possibly because of a speech by Maros Sefcovic, the EU vice president. In the speech, he warned that the likelihood of a no-Brexit deal was increasing as key differences remain. Separately, data from Markit and the Chartered Institute of Purchasing Supply (CIPS) showed that the UK construction PMI rose to 56.8 in September from 54.6 in the previous month.

The euro rose slightly as the market reacted to the overall weaker dollar and positive numbers from Europe. In Germany, data from Destatis showed that factory orders rose by 4.5% in August after rising by 3.3% in the previous month. The final reading was better than the 2.6% that analysts were expecting. The rise in orders was mostly because of foreign buyers. In Sweden, data showed that industrial production rose by 7.8% on a MoM basis in August. The orders fell by -0.2% on a year-on-year basis. Also, the currency reacted to a statement by Christine Lagarde, who said that she was prepared to add stimulus and cut rates to support the economy.

EUR/USD

The EUR/USD pair is trading at 1.1791, which is just 9 pips below the important resistance level of 1.1800. On the four-hour chart, the price is above the previous resistance at 1.1970. It is also slightly above the 25-day exponential moving average. At the same time, the signal and main line of the MACD are above the neutral line. Therefore, the pair is likely to continue rising, with the next resistance level at 1.1830.

GBP/USD

The GBP/USD pair declined to an intraday low of 1.2912. On the hourly chart, the lowest level today was along the ascending trendline that connects the lowest level on September 25 and October 1 and 2. The price is below the 25-day exponential moving average while the Average True Range (ATR) has started to rise. Therefore, the price is likely to continue rising so long as the price remains above the ascending green line. 

AUD/USD

The AUD/USD pair dropped to an intraday low of 0.7143. On the four-hour chart, this price is below the ascending trendline that is shown in green. The price has also moved below the 25-day and 15-day exponential moving averages. It is also along the 38.2% Fibonacci retracement level. By moving below the ascending triangle pattern, it means that bears have prevailed, which is a sign that the price may continue falling.