27.03.2019 10:05 AM
USD and GBP: The market ignores weak US statistics. What are the possible scenarios for Brexit?

Despite a number of negative fundamental data, which was released yesterday on the American economy, the US dollar strengthened its position against the euro. Traders and investors reacted positively to the quotations of futures on the Fed's rates, where the probability of their decline by the end of the year was estimated at 66% versus 72% at the end of last week.

I recall that last Wednesday, the US dollar fell against a number of world currencies after the Federal Reserve System signaled that it did not plan to raise interest rates this year and is completing its program to reduce the balance of the Fed, hinting at lower rates if necessary.

As noted above, poor US data was ignored by the market. According to a report by the US Department of Commerce, the number of new home bookings in February fell by 8.7% compared with the previous month and totaled 1.162 million.

The number of building permits also decreased, by 1.6% per annum, and totaled 1.296 million. Economists had expected that the number of bookmarks in February would fall by 1.6% compared with the previous month, and permits would decrease by 2.6%.

Growth in house prices in January continued to slow, which will positively affect the spring sales season. According to the data, the national house price index S & P / Case-Shiller in January rose by only 4.3% compared with the same period of the previous year, after rising by 4.6% in December.

Given that mortgage rates will not increase in the near future, a slowdown in house price growth is a good sign. The Case / Shiller housing price index for 10 megacities in January increased by 3.2% compared with the same period of the previous year, and the price index for 20 megacities increased by 3.6%. Economists had expected the index for 20 megacities in November to show an increase of 3.9%.

Production activity in the area of responsibility of the Federal Reserve Bank of Richmond fell. According to the data, the Fed-Richmond manufacturing index in March 2019 fell to 10 points against 16 in February.

The traders ignored the weak report, which indicated that the US consumer confidence indicator fell in March. According to the Conference Board, the consumer confidence index fell to 124.1 points in March from 131.4 points in February, while economists had forecast that the index would amount to 133 points in March.

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As for the technical picture of the EURUSD pair, now buyers need to urgently rehabilitate themselves. As long as trading will be above support at 1.1250, the demand for euro will remain, but its breakdown will lead to a new wave of decline in risky assets, with the renewal of 1.1220 and 1.1170 lows. If demand for the euro persists after the speech of the European Central Bank President Mario Draghi, which is scheduled for the first half of the day, the sellers of risky assets will manifest themselves after updating the resistance of 1.1290 and from a larger maximum of 1.1325.


In the near future, a vote on Brexit scenarios will begin in the UK Parliament. The main options include a withdrawal without a deal, a request for a longer delay in withdrawing from the EU, accepting the deal proposed by Theresa May, maintaining the UK membership in the customs union and holding a second referendum on this topic.

Any option excluding exit without a transaction will be favorably received by the market.

A breakout of large resistance levels around 1.3260 and 1.3320 will resume the uptrend in the pound and lead to a test of the highs of 1.3440 and 1.3570. In the event of a negative market reaction to the news, large levels of support in the GBPUSD pair around 1.3080 and 1.3004 may limit the downside potential.

Jakub Novak,
Analytical expert of InstaForex
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