Summarizing BREXIT: the “divorce” has left a number of unresolved questions

Yesterday was a slow day. Among fundamental news, China’s GDP was of interest. The number beat expectations, exhibiting the equivalent of 6.9% annual growth. In the short term, this increased the volatility of the Chinese yuan, but had no substantial impact on the basic USD/CHY pair, and the dollar maintained its short-term descending bearish trend.
The EU’s consumer price index came out at 9:00 am GMT. The data matched the consensus forecast of 1.3%. Today’s key news was the return of David Davis, UK secretary, to Brussels. To sum up BREXIT, Davis told reporters that good progress was being made in the “divorce” negotiations, but there are still a number of problems to be resolved, i.e., the status of EU citizens in the UK and the United Kingdom’s financial obligations.

Stocks

Among today’s corporate reports, investors of course focused on the report from Netflix, the US entertainment company that is traded on NASDAQ and Russia’s Uralkali. The US company’s stock opened with a gap up, but the gap was later successfully eliminated.
Overall, the US stock market continues to exhibit steady growth. Despite a slight dip in a key US index - the Dow Jones Industrial Average - the situation looks advantageous for the bulls. When trading up, we would advise not forgetting about the price gap formed on 07/12/2017 that has not yet been closed. We therefore cannot rule out the price’s short-term return to 21,500 points, where the 9-day exponential moving average is located.

Currency Market

It cannot be said that the EUR/GBP pair reacted strongly to Mr. Davis’s statements. Overall, nothing specific has been heard. On the daily charts, the euro broke through the 9-day EMA top down as early as Friday. It appears that the resistance will be 0.8800, where the 23.6% Fibonacci correction that began on 04/18/17 is located. The euro’s support and possible target will be 0.8707 if, of course, the breakthrough is confirmed. Short positions will therefore apparently be attractive, and the bears may have to stay on the sidelines for now.
The dollar continues to yield ground on all fronts. The EUR/USD pair rose again on Friday and yesterday. Investors were disappointed in the open markets committee’s further hardening of monetary policy. Technically, the resistance might be at 1.1500, where the bears might again try to seize the initiative. But until that time and until there are signals of a reversal, long positions should still prevail.

Nikolay Dudchenko, exclusively for Olymp Trade

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