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Brexit Latest Helps Pound but GBP/USD Downtrend Holds. JPY at Risk

Brexit Latest Helps Pound but GBP/USD Downtrend Holds. JPY at Risk

Daniel Dubrovsky, Strategist

Asia Pacific Market Open – Brexit News, British Pound Prices, S&P 500, USD/JPY

  • Brexit latest supports British Pound but the dominant downtrend in GBP/USD still holds
  • Euro prices rallied too, but most support due to Swedish Election results. USD/CHF rose
  • Asia Pacific shares may echo gains from S&P 500 and NASDAQ Composite, Yen at risk

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The British Pound soared against its major counterparts on Monday as supportive Brexit news crossed the wires. EU’s Chief Brexit Negotiator Michael Barnier said that getting a Brexit deal is ‘realistic’ in six to eight weeks. Accompanying GBP/USD’s ascent was a surge in front-end government bond yields, signaling rising BoE hawkish monetary policy bets ahead of this week’s interest rate announcement.

Another notable benefactor of this update were Euro prices, which too soared. However, most of EUR/USD’s gain was capitalized as European markets came online after the Swedish Election. The DAX rose 0.22% and Euro Stoxx 50 by +0.48% after the Eurosceptic Sweden Democrats performed worse than expected compared to preliminary polls.

As a result of the improvement in market mood, the anti-risk Swiss Franc notably underperformed but by even more so than its similarly-behaving Japanese counterpart the Yen. This may have been due to the Franc’s role at times as the favored European regional haven asset which gives it an edge over JPY when it comes to EU political uncertainty.

The ‘risk on’ trading dynamic echoed into Wall Street where the S&P 500 and NASDAQ Composite rallied 0.19% and 0.27% respectively. This offered those global benchmark stock indexes a relief after consecutive days of losses. Meanwhile the pro-risk Australian Dollar headed cautiously higher. The US Dollar was rather mixed as the Euro and British Pound appreciated.

With that in mind, after yesterday’s mixed session, Asia Pacific markets could take this opportunity to trade higher absent revived fears of trade wars. Such an outcome could bolster the Australian Dollar while dampening the Japanese Yen. The former could also show some temporary volatility on Australian business confidence.

GBP/USD Technical Analysis – April Downtrend Still Holds

British Pound prices may have made upside progress in recent days, but GBP/USD still remains contained by a descending range of resistance from May. A push above the channel with confirmation would pave the way for a reversal of its dominant downtrend since April. This places near-term resistance as the 38.2% Fibonacci retracement at 1.3317.

Brexit Latest Helps Pound but GBP/USD Downtrend Holds. JPY at Risk

Chart created in TradingView

US Trading Session

Brexit Latest Helps Pound but GBP/USD Downtrend Holds. JPY at Risk

Asia Pacific Trading Session

Brexit Latest Helps Pound but GBP/USD Downtrend Holds. JPY at Risk

** All times listed in GMT. See the full economic calendar here

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--- Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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