18.10.201909:11 Forex Analysis & Reviews: The release of tension around Brexit will put pressure on the value of protective assets (we believe it is possible to buy on the decline of EUR/USD and AUD/USD pair)

Yesterday's news about the Brexit agreement between Boris Johnson and the European Union led to an increased optimism in the currency market and supported major currencies against the US dollar. On the other hand, quotations of "yellow metal" - gold, which sharply decreased, also received local support.

However, as they say, music did not play for long. After the announcement that the Northern Irish Democratic Union Party (DUP) would not be able to support the deal in its current form, the market situation sharply turned around. Equity markets in Europe, including Britain, went down amid increased demand for defensive assets, while the pound and the single European currency fell slightly back. Meanwhile, gold and the Japanese yen also declined, but not much, as there is still hope in the markets for a normalization of the situation with Britain's exit from the EU, that an adequate deal will nevertheless be reached.

Assessing the evolving picture in Europe, it can be argued that the positive is still preserved and, if everything is really so, it can lead to the continuation of local appreciation of the British currency, which will also pull the euro and the local market upwards stocks. On this wave, we also expect a decline in the quotations of gold as well as the demand for protective assets in general - the yen, the Swiss franc, as well as government bonds of economically strong countries.

Moreover, with the emergence of some certainty regarding Brexit, this situation will begin to gradually fade into the background, giving way to the themes of the risk of a global recession and trade negotiations between Washington and Beijing. Although it should be recognized that if the tension around Britain's exit from the EU is really removed, a compromise is found, and this will become a serious basis for easing tensions in Europe and reduce investor interest in protective assets, which will affect their prices.

Forecast of the day:

EUR/USD may correct to the level of 1.1100 before resuming an upward movement. We believe that if it holds above this level, it should be bought on a wave of high probability of resolving Brexit's theme with a local target of 1.1160.

The AUD/USD pair is trading below the level of 0.6835. It can also be corrected down to the level 0.6805 or to 0.6800. If this level holds, the pair must be bought, as well as after overcoming the level of 0.6835 with a local target of 0.6885.