GBP/USD falls to a low of 1.3038 on the day
If there's one things traders dislike more than anything else, it's uncertainty. This week promises to be a really uncertain one for the pound as Theresa May could potentially be facing at a no confidence vote and traders will have to deal with the possibility that she may not be at the helm come the end of the week.
EUR/USD has nearly pared all of its gains on the day now
The pair now heads back towards a test of the 100-hour MA (red line) after failing to hold a break above the 200-hour MA (blue line) with minor resistance close to 1.1550 helping to limit gains on the day.
Domestic politics look set to make this a possibly unpredictable and volatile week
If you're a pound trader, you very much would be used to the sort of volatility that has been brought upon by Brexit. While that still remains on the radar, now you also have to factor in the possibility that this week.
GBP/JPY rises to a high of 147.49 on the day
Yen pairs are on the up as the session begins with but also Italian assets are set to begin the week with a decent rally - and that will continue to underpin risk sentiment on the session.
Italy's 10-year bond yields are down 10 bps to start the week
EUR/USD touches a high of 1.1536 on the session as the euro gains some poise on the back of a much calmer backdrop seen in Italian assets to begin the new week. Late on Friday, Moody's decided to cut Italy's credit rating to one grade above junk status but the key was that they revised the outlook to stable. That means the likelihood of a further downgrade to junk status is off the table for now and that's what investors are cheering about.
112.65 holding so far
USD/JPY is testing minor resistance at 112.65 after falling as low as 112.35. The turnaround comes as sentiment is buoyed by a massive rally in Chinese equity markets following a household tax cut announcement and upbeat commentary from leaders on Friday.
Bounce from the bottom continues
The kiwi is the top performer today while the yen lags. This is the classic pair for the risk trade, although I'd argue that's a dangerous way to look at it given the housing fears in New Zealand and flat interest rate profile for the foreseeable future.
Italy budget vs Brexit
Which is worse? Italy's budget problem for the Euro or Britain's N.Irish border problem for the GBP?
This is what EURGBP is trying to decide at the moment as price coils, ready to spring.
GBPUSD contained by 100EMA
Price contained by the 100EMA (blue line) on the 15 minute chart. Looking at the daily chart the pressure is firmly on the GBPUSD to fall to the downside. Near term risk is now above the 100EMA.
GBPUSD falling off 100 EMA
The 100 EMA (blue line) halted the rise of GBP/USD on the 15 minute chart. Stay below and we are looking at testing the daily lows again. With all the bearish sentiment around I would expect a second test break through the support level and head through 1.3000
Weakening outlook for GBP
The situation for Britain coming out of the EU Summit looks at putting further uncertainty ahead for the GBP. No hint of a deal and more problems than solutions. Admittedly the problem is the same one, what to do about the N. Irish Border, but the outlook for a solution is waning in my view.
Gold maintains it's shine
As long as treasury yields are rising and equities are falling Gold longs keep making sense.
I posted earlier in the session that Gold was likely to be bid at the 100 EMA today on the 1 hr chart and that has turned out to be the case.
Seeking gain from Gold
Gold makes sense again. US 10 year treasuries yields are rising and the Equity markets are falling with price falling further in the US last night in the S&P and Dow and Nasdaq. More declines look imminent and ominous.
USD/CAD up 60 pips
USD/CAD is flirting with some major technical levels today. It briefly broke above the late September high but is now back below. However it remains above the 100-day moving average.
Not looking good for stocks
The drop in USD/JPY was the early-warning sign for stocks, something earlier.
I wrote about
Now the wheels have come off for US stocks. The S&P 500 is down 39 points to 2769. The low on Tuesday was 2766. Expect another round of stops if the lows give way.