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October 4, 2016

Trading signals October 4. Brexit date and in to run-up to September NFP.

Trading signals October 4. Brexit date and in to run-up to September NFP.

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A guest of today’s market analysis, as many of you have guessed, is the UK Pound. The currency renewed 30-years low as an ardent and influential supporter of UK independence – Prime Minister Theresa May announced the date when official Brexit process begins. It is a frustration for those who expected to stay within EU bloc another 1-2 years as the formal exit starts as early as at the end of March 2017. As speculations rise what will be the new ties with the EU in financial, trading, migration and military spheres, bears increase pressure on sterling, driving it to three-decades low of 1.27550:

 

screen-shot-2016-10-04-at-11-46-21-am

The Prime Minister noted that independent UK is likely to tighten immigration hinting on the so-called “Hard Brexit” version -although running the risk to lose access to EU’s single trading market. Being the export-oriented country losing EU market will be the tough blow to UK economy also weak pound makes up for this risk making the export more competitive and boosting revenues of the sector.

Optimistic UK construction PMI index released today failed to transmit any optimism to the currency overwhelmed with the bearish sentiments as the main focus is on the details of BREXIT process.  As we see only the “top of iceberg” in this story and there is a lot that remains unclear related to UK exit, Pound substantial recovery in the short-term outlook is quite unlikely. The currency will probably continue to head downside with a weak pullbacks from key supports with a next target to test 1.25 level.

Trading call: Sell Limit GBPUSD at 1.2850 Target – 1.25200, SL – 1.30

Gold

The bullion keeps losing from 26 September on Dollar gains amid Fed rate hike speculations which dampens yield expectation for the investors. Upbeat sentiments ahead of NFP were propelled by optimistic ISM Manufacturing report released on Monday, topping estimates. The report is also useful to assess current labor conditions so positive ISM also increases chances for good NFP figures. Rising greenback ahead of Friday employment report is likely to push Gold lower but considering it trades near three-month low and uncertainty related to NFP we can expect it to pare some declines returning to 1,330 area.

Trading call for gold: BUY XAUUSD at 1,305-1,310, Target – 1.335-1,340, SL  -1,298

 

screen-shot-2016-10-04-at-1-04-31-pm

That’s it for today!

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