STERLING JUMPS AFTER BREXIT HOPES
Asian markets rose after Chinese communist officials signaled a fresh round of stimulus aimed at supporting the economy. This came after the country reported weak economic data in recent days. This week, the manufacturing PMI data showed that the sector was nearing the contraction phase. Today, the Caixin manufacturing PMI showed slight improvement from 50 to 50.1. The official PMI data from the government surveys a larger number of companies than the Caixin one. As the world’s second largest economy and the world’s biggest producer and consumer, weakness in the economy could be an indicator of the status of the global economy.
Yesterday, sterling neared the important support level of 1.2660. It then started moving higher after fresh Brexit hopes. In a statement, the Brexit minister said that a new deal was about to be made and could be confirmed by November 21. After making the statement, the minister backtracked but traders are now hopeful that a deal will be made. This came ahead of the important monetary policy statement from the Bank of England.
The price of crude oil ended lower yesterday, making October the worst month in more than 2 years. The declines continued in the Asian market as traders worried about supply. Inventory data from the EIA showed that the inventories were at 3.2 million barrels. This was lower than the 4.1 million barrels expected by the market. It was also lower than the 5.7 million released by the American Petroleum Institute (API).
Yesterday, the EUR/USD pair reached an important low of 1.1300. This was the lowest monthly low. As expected, it then started moving higher as bears took their monthly profit. In the Asian session today, the pair reached an intraday high of 1.1350. While the 15 and 30-day EMA crossover has not happened, there are signs that it could happen as shown below. Therefore, there is a likelihood that the pair will see a rally, albeit short term, that could test the 1.1400 level.
The GBP/USD pair neared the important support of 1.2660. After the statement from the Brexit minister, the pair jumped and today, it reached a high of 1.2860. After a month of declines, this will likely be a start of a strong rally as the EMA crossover indicates below. The statement by BOE could further provide a catalyst for the rise of sterling. If it rallies, it will likely move to the 1.2980, which is also the 50% Fibonacci Retracement level.
The price of crude oil continued to move down in the Asian session, reaching a low of $74.55. This was the lowest it has been since August 22. Even with the big declines in October, the pair’s path of least resistance seems to be downwards. The RSI is at 31 while the ADX is at 17, a sign of the weaker trend. However, this will be an important month for crude oil as the Iran sanctions near and the US responds to the murder of Jamal Khashoggi.