10.09.202011:45 Forex Analysis & Reviews: Trading plan for EUR/USD and GBP/USD for 09/10/2019

Yesterday turned out to be quite interesting, especially due to the sudden growth of both the single European currency and the pound. The growth began when no data was published, as there was not much macroeconomic data yesterday. And given that everyone is now only engaged in discussing Brexit, it is logical to conclude that this is the reason for such unexpected behavior. But this is extremely unlikely. In fact, Boris Johnson submitted a promised document yesterday on Northern Ireland and trade. The document is called the "law on the protection of the internal market of the UK", and it contains everything that was discussed on Tuesday. It gives ministries the right to unilaterally change the rules for the transit of goods and services between Northern Ireland and the rest of the UK. This law cancels all previous agreements regarding the border between Ireland and Northern Ireland, as it is intended to limit the duty-free import of goods from the EU. However, the bill itself states that various ministries can only apply these measures if the European Union refuses to sign a full-fledged trade agreement with the United Kingdom. So, this is nothing more than a common blackmail. By the way, this has already disrupted the next round of negotiations between London and Brussels and had an exceptionally negative impact for the pound and slightly for the single European currency during the last few days. Moreover, the content of the document itself did not come as a surprise, perhaps Boris Johnson's actions have been harshly criticized even by his Conservative supporters. Thus, it is most likely that the bill will be rejected by the House of Commons.

Against this background, the United States intervened, saying that if this law is passed, then London should not expect to conclude a trade agreement with Washington. And we are not talking about Brussels, which threatens the United Kingdom with lawsuits on the issue of unilateral changes to the provisions of already signed agreements. As we can see, Boris Johnson's initiative is clearly a failure. Moreover, this story itself clearly increases the risks of an unregulated Brexit, that is, without a trade agreement or other agreements regulating further interaction between the parties. And although the factor is extremely negative, the European currencies rose. Apparently, the Brexit issue only became a psychological factor. They say that everything will be okay and no unnecessary laws will not be accepted. Now, the main factor is today's meeting of the Board of the European Central Bank, for which investors decided to prepare in advance. In addition, both the pound and the single European currency have noticeably fallen in price over the past few days, so the local technical rebound also looks quite good.

If we talk about macroeconomic statistics, the US statistics was great yesterday. It turns out that the number of open vacancies has grown from 6,001 thousand to 6,618 thousand, indicating more free jobs, which means that the unemployment rate will continue to decline. As we can see, the improvement of the situation on the labor market inevitably leads to an acceleration of economic growth. So, in general, the prospects for the dollar looks great.

Job Openings in the Labor Market (United States):

The main event of the whole week is the meeting of the Board of the European Central Bank, which does not necessarily have an impact as no changes in interest rates are expected. The only interesting thing is the speech of the ECB's head, C. Lagarde. Here, it is necessary to remember what various representatives of the ECB have been saying recently – apparently, they said that the policy of negative interest rates had already exhausted itself and it was time to think about some changes in monetary policy. Moreover, even such a terrible idea was expressed as the fact that the policy of negative interest rates is more likely to be harmful to the economy, at least for the long-term. But this policy has been pursued for several years already. Therefore, investors are hoping to hear plans from Lagarde to change the monetary policy of the ECB, which contributes to the growth of optimism regarding the single European currency. However, it is likely that we will not hear anything like this. Deflation has begun in Europe, which can only be fought by increasing the money supply. So, most likely, we will hear words about the expansion of stimulus measures and the like, instead of interest rates.

Refinancing rate (Europe):

At the same time, Christine Lagarde's speech coincides in time with the publication of data on applications for unemployment benefits, which no one will pay any attention to. Nevertheless, it should be noted that the number of initial applications for unemployment benefits may decline from 881 thousand to 846 thousand, while the number of repeated applications should decline from 13,254 thousand to 12,925 thousand. In other words, the data should show a further recovery in the labor market in the United States, which will inevitably lead to an improvement in other macroeconomic indicators. Thus, the dollar will retain its strengthening potential, although the outcome of the ECB meeting is already likely to strengthen the dollar.

Repetitive Unemployment Insurance Claims (United States):

The EUR/USD pair, moving along a downward course from the resistance level of 1.2000, managed to decline to the area of the local low (1.1750) on August 21, where the price naturally rebounded. We can assume a temporary fluctuation within the 1.1800 level, with a maximum deviation of 50 points. The main movement will occur if the price is consolidated relative to the deviation boundaries of 1.1750/1.1850.

Since the beginning of autumn, the GBP/USD pair has had a predominant downward interest, during which the quote managed to pass more than 500 points, eventually hitting the subsequent support level of 1.2885, where a rebound occurred. We can assume a temporary price fluctuation within the values of 1.2950/1.3050, where the best trading strategy will be the method of breaking through the established boundaries.