Vaccine Optimism on the Rise, FX Markets Start To Simmer

 Brexit Negotiations Are Making Progress, Too 

by Bogdan Giulvezan

Brexit negotiations are still underway but a recent development may prove to be beneficial. Dominic Cummings, Chief Advisor to Prime Minister Boris Johnson and an influential figure in the vote to leave campaign, has decided to resign. The market interprets this as a positive thing and possibly something that will aid in the negotiations since the British PM will not be influenced by “anti-EU” counselors. EU leaders will convene on Thursday, seeking to reach a long-overdue solution to the trade deal.

Key Events for the Week Ahead

Tuesday, November 17 at 1:30 pm GMT, the US Retail Sales report comes out, showing changes in the monthly value of sales made at retail levels. Because retail sales account for the vast majority of overall economic activity, a higher number shows a thriving economy and has a positive impact on the greenback. The expected change is 0.5% (previous 1.9%). Keep an eye on the Core version as well (excludes automobile sales from the calculation) that will be released at the same time: forecast 0.6%, previous 1.5%.

Thursday the European Council will hold a Video Conference and any new developments regarding the EU – UK trade negotiations, will likely generate volatility on EUR and GBP pairs but on the other hand, the impact may be muted if nothing major transpires.

Friday at 8:15 am GMT, ECB President Lagarde will speak at an online event accommodated by the European Banking Congress. The impact is not expected to be high but caution should be used whenever heads of central banks speak publicly.

Chart Analysis – GBP/USD

The pair is trading around 1.3180, above the 100 periods Exponential Moving Average (4H chart) and above the horizontal support level at 1.3100. Overall the US Dollar is showing weakness, as investors are looking to move from safe-haven assets to riskier markets such as stocks but the Pound is also weighed down by the failure to reach a consensus in the EU – UK trade deal negotiations.

The levels to watch this week are 1.3100 as support (price already bounced off it last week and the 100 EMA is in close vicinity, which gives more strength to the level) and 1.3280 – 1.3300 as resistance.

The bias is bullish but unless we see some new developments in the EU – UK trade deal negotiations, we will probably have a slow week, with the pair confined between the two boundaries just mentioned. The MACD lines are close together and the RSI is trading in the middle of its range, supporting a ranging market scenario.