The supreme test of pound, China's GDP & US retail sales

18 thg 10, 2019

Yesterday Brexit turned a corner. The Prime Minister got the European Union to renegotiate the Withdrawal Agreement that the EU said to would never renegotiate. The British pound, as we expected, hit a fresh five-month high above 1.30. But after that, many buyers decided to take profits, resulting in a rebound of the pound more than 150 points down. The reason for taking profit was both about 1000 points per week, which, for example, could be earned in the GBPUSD, and fears that Brexit deal might fail again.

Parliament is expected to sit on Saturday in what could be one of the most important Commons’ sessions of the entire Brexit process. Recall ones the agreement between the EU and Great Britain was already agreed, but the country's parliament voted “against”, as a result, Teresa May resigned and everything had to start all over again. If the story repeats, then the further development of events can be quite unpredictable. That is why many decided to take profits, and it is difficult to blame them. The fact is that the current version of the treaty doesn’t quite satisfy the Irish Democratic Party. And without their support, Johnson is unlikely to gain enough votes.

As for our position, so far it is unchanged. We consider such bounces of 150 points as an excellent opportunity for purchasing. If the Parliament votes “for”, the pound will simply be doomed to further growth. It will be 200-300 points or 1000 is difficult to say, but pound purchases will live up to.

If Boris fails that will certainly trigger massive sales in pound pairs. This option must be borne in mind and do not forget to put stops. You can safely sell the pound if he loses.

The US, meanwhile, continues to show weak macroeconomic statistics. Yesterday, data on industrial production not only came out worse than forecasts below 0. The statistics on the real estate market did not please either. In general, we see an increasing number of reasons for the sale of the dollar. And today we continue to look for points to open short positions on the dollar in the foreign exchange market.

Of the other statistical news, it is worth noting today's data on China's GDP. The indicator reached 6% (with a forecast 6.1%). Industrial production growth rates (went above forecasts) and retail sales (within the framework of forecasts, but in a good plus).

In this light, our recommendation to buy safe-haven assets continues to be relevant. So today we continue to look for points for purchases of gold, as well as the Japanese yen.