23.10.201909:39 Forex Analysis & Reviews: Brexit Theme

At the end of Tuesday, the US dollar received some support against major currencies with the exception of the Japanese yen. At the same time, gold quotes have somewhat grown, although they still remain in a very narrow range for the second week now.

The theme of Brexit, as well as trade negotiations between Washington and Beijing, remains the leading one in the minds of investors in all world markets without exception. Trading participants against the background of the risk of a new world recession, as well as incentive measures from the ECB and the Fed, are in no hurry to take one side or another in the market. And although some progress has been outlined in the US-Chinese negotiations, it is true that so far, we only have to take the word for US representatives from the PRC, but the whistle around Brexit already resembles a little vaudeville, which has grown into a tragicomedy over the past few months.

In the past few days, investors have tried to turn their attention to corporate reporting in the United States, trying to understand how much the trade war between China and the United States affects company earnings, and they succeeded because, generally, reporting has shown that it is minimal. However, despite this positive news, the situation around Brexit still has a noticeable negative impact, which is clearly manifested in the dynamics of defensive assets.

At the same time, gold is gaining support at Asian trading again, although it remains on the sidelines. The yen is also strengthening and the benchmark yield of 10-year-old treasuries has resumed its decline by which at the time of writing, it is reduced by 1.29%, to 1.743%. Again, it can be noted that the overall dynamics in the markets is not so straightforward. If the dollar loses a little against the yen, and gold grows, then other major currencies still weaken against the dollar.

In general, observing the overall picture, we can say that there are risks of uncertainty about the situation with Brexit, lack of details of the negotiations between the United States and China on trade, high risks of continuing slowdown in global economic growth in general, as well as the American and Chinese in particular will force investors to exercise a high degree of caution, which will continue to manifest itself in high volatility in world markets.

Forecast of the day:

EUR/USD is trading at support level of 1.1120, if market sentiment continues to deteriorate, the pair will runs the risk of continuing to further decline to 1.1060.

GBP/USD is above the level of 1.2840. The uncertainty surrounding Brexit puts pressure on it. If the price drops below this level, there is a high probability of continuing local decline to 1.2745.