Whatever we had in mind for this week’s review, it just fell apart when we heard the news. The last week in forex was a bit bearish to say the least, but it is the possibility of “UK no more” that rocked the financial markets the most. When people in the UK decided to go ahead and leave the EU, most of those who voted for Brexit were in one part of the country, whereas most people who didn’t want to leave the EU were in Scotland. Two years ago, there was a referendum about Scotland leaving the UK, and one of the key factors that “helped” their voters decide was the threat of having to reapply for EU membership. Now that this is the best case scenario, Scotland has no reason to stay in the UK and has already announced its plans for a new referendum. But let us recap the recent forex events first:
The Week Behind Us:
EUR/USD: Well, we said that this neutral trend will last a few more days but those days are finally numbered. On Wednesday, the pair turned bearish and for the time being, the immediate target is 1.0950.
GBP/USD: All things considered, we are still waiting for the GBP to get weaker still. Possibly reaching as low as 1.1500, albeit not as soon as we had hoped. Basically, we are still waiting for the price to go over 1.2360 in order to mark the end of this bearish phase. Until that happens, the trend is on.
AUD/USD: One thing that remains the same is this pair, although it too may turn bearish soon enough. How will you know this? Well, it will close below the 0.7510 line, for start. Another thing that could happen is for AUD to jump back to 0.7600 within the next day or two.
NZD/USD: The bearish phase is definitely going out of steam, but it still soldiers on. You will know when it happens, as NZD will close above 0.7110.
USD/JPY: The bullish phase from last week is still going, but there is no way of telling for how long. For now, at least consider taking partial profit at 105.00. As for the stop-loss, it should be somewhere around 102.70.
Forex Forecast for Major Pairs:
EUR/USD: Bearish, with the immediate target at 1.0950.
GBP/USD: Bearish. You can expect the next support level at 1.1500.
AUD/USD: Neutral. Bearish only if it closes below 0.7510.
NZD/USD: Bearish. 0.7010 is the next support level.
USD/JPY: Bullish. Recommend take partial profit at 105.00.
UK’s 20 Billion Euro Divorce
It is odd that nobody in Westminster Abbey bothered to let the voters in the UK know that their country could lose as much as $22 billion, which is the number that Financial Times analysts came up with recently. This is only a drop in the ocean of shared payment liabilities that is 300 billion euros deep.
Or maybe they just forgot. After all, it was a long time ago that the country joined in on these financial obligations thing that involves things such as pension pledges and even funding infrastructure projects at the EU level. They may be getting a divorce, but it seems Brussels is still going to hold them to their earlier commitments, which could be a huge point of contest as the UK politicians have no real incentive to honor any of these project anymore.
Between these and other commitments, one could barely begin to grasp the complexity of the situation as well as the negotiations that still have to take place. From their side, the UK is hoping to retain as many privileged it once held – if not all, but on the other hand they may end up losing way more than they bargained for. And since the UK is the one in need of a trade deal with the mainland in order to keep the investors from fleeing, it may be forced to make some serious concessions in the future. In any case, it remains to be seen just how successful their struggle will be.
Scottish Referendum 2.0 – UK No More?
The main story this week certainly has to deal with a very real threat of Scotland leaving the UK – or trying to – for the second time in almost three years. According to Nicola Sturgeon, First Minister of Scotland, the legislation for the second independence referendum is already in the works. Considering that the alternative would be to stay with the UK through so-called “hard Brexit”, this seems far more appealing as a solution, and judging by the initial reactions, it just might pass this time around.
It could be argued that she is the only real opposition to the conservatives in Westminster, whom she accused of “hijacking” the results of the referendum at the last conference of SNP last Thursday. These notions are hardly surprising, as many analysts have already pointed out that Scotland might try to secede again in the event of Brexit, but this is happening much more quickly than anyone even realized. All those optimists who predicted the UK is going to have it easy now that it no longer has to bow to those bureaucrats in Brussels are in for a very hard wake up call.
Next Week in Forex
01:01 GBP Rightmove House Prices (MoM) (OCT)
01:01 GBP Rightmove House Prices (YoY) (OCT)
06:30 JPY Industrial Production (MoM) (AUG F)
06:30 JPY Industrial Production (YoY) (AUG F)
11:00 EUR Euro-Zone Consumer Price Index (MoM) (SEP)
11:00 EUR Euro-Zone Consumer Price Index (YoY) (SEP F)
11:00 EUR Euro-Zone Consumer Price Index – Core (YoY) (SEP F)
15:15 USD Manufacturing (SIC) Production (SEP)
23:10 AUD RBA Governor Lowe Speech in Sydney
23:45 NZD Consumer Prices Index (QoQ) (3Q)
23:45 NZD Consumer Prices Index (YoY) (3Q)
NZD Dairy Auction Avg. Winning Price MT (OCT 18)
NZD Dairy Auction Whole Milk Powder MT (OCT 18)
02:30 AUD RBA Oct. Meeting Minutes
10:30 GBP Consumer Price Index (MoM) (SEP)
10:30 GBP Consumer Price Index (YoY) (SEP)
10:30 GBP Core Consumer Price Index (YoY) (SEP)
14:30 USD Consumer Price Index (MoM) (SEP)
14:30 USD Consumer Price Index Ex Food & Energy (MoM) (SEP)
14:30 USD Consumer Price Index (YoY) (SEP)
14:30 USD Consumer Price Index Ex Food & Energy (YoY) (SEP)
16:00 USD NAHB Housing Market Index (OCT)
22:00 USD Net Long-term TIC Flows (AUG)
01:30 AUD Westpac Leading Index (MoM) (SEP)
04:00 CNY Industrial Production (YoY) (SEP)
04:00 CNY Industrial Production YTD (YoY) (SEP)
04:00 CNY Retail Sales (YoY) (SEP)
04:00 CNY Retail Sales YTD (YoY) (SEP)
04:00 CNY Fixed Assets Ex Rural YTD (YoY) (SEP)
04:00 CNY GDP YTD (YoY) (3Q)
04:00 CNY GDP SA (QoQ) (3Q)
04:00 CNY GDP (YoY) (3Q)
06:30 JPY All Industry Activity Index (MoM) (AUG)
10:30 GBP Claimant Count Rate (SEP)
10:30 GBP Jobless Claims Change (SEP)
10:30 GBP Average Weekly Earnings (3M/YoY) (AUG)
10:30 GBP Weekly Earnings ex Bonus (3M/YoY) (AUG)
10:30 GBP ILO Unemployment Rate (3M) (AUG)
10:30 GBP Employment Change (3M/3M) (AUG)
13:00 USD MBA Mortgage Applications (OCT 14)
14:30 USD Housing Starts (MoM) (SEP)
16:00 CAD Bank of Canada Rate Decision (OCT 19)
16:00 CAD Bank of Canada Releases Monetary Policy Report
16:30 USD DOE U.S. Crude Oil Inventories (OCT 14)
20:00 USD U.S. Federal Reserve Releases Beige Book
01:50 JPY Japan Buying Foreign Bonds (Yen) (OCT 14)
01:50 JPY Japan Buying Foreign Stocks (Yen) (OCT 14)
02:30 AUD NAB Business Confidence (3Q)
02:30 AUD Employment Change (SEP)
02:30 AUD Unemployment Rate (SEP)
02:30 AUD Full Time Employment Change (SEP)
02:30 AUD Part Time Employment Change (SEP)
13:45 EUR European Central Bank Rate Decision (OCT 20)
13:45 EUR ECB Deposit Facility Rate (OCT 20)
13:45 EUR ECB Marginal Lending Facility (OCT 20)
13:45 EUR ECB Asset Purchase Target (OCT)
14:30 USD Initial Jobless Claims (OCT 15)
14:30 USD Continuing Claims (OCT 8)
14:30 USD Philadelphia FED. (OCT)
04:00 NZD Credit Card Spending (YoY) (SEP)
10:30 GBP Public Finances (PSNCR) (Pounds) (SEP)
10:30 GBP Central Government NCR (SEP)
10:30 GBP Public Sector Net Borrowing (Pounds) (SEP)
10:30 GBP PSNB ex Banking Groups (SEP)
14:30 CAD Consumer Price Index (MoM) (SEP)
14:30 CAD Consumer Price Index (YoY) (SEP)
14:30 CAD Bank Canada Consumer Price Index Core (YoY) (SEP)
16:00 EUR Euro-Zone Consumer Confidence (OCT A)