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Stocks Brush off Trade War. Brexit News Boosts GBP, Uptrend Grows

Stocks Brush off Trade War. Brexit News Boosts GBP, Uptrend Grows

Daniel Dubrovsky, Strategist

Asia Pacific Market Open – US China Trade War, S&P 500, Brexit News, GBP/USD, BoJ

  • Brexit latest offers cautious British Pound gains as the US Dollar depreciates
  • S&P 500 brushes off escalating US China trade war as anti-risk JPY weakens
  • GBP/USD prices rose above range resistance, reversing dominant downtrend

See our study on the history of trade wars to learn how it might influence financial markets!

The latest Brexit news is offering cautious British Pound gains heading into Wednesday Asia Pacific trade. According to an interview with the Daily Express, Prime Minister Theresa May noted that “the withdrawal agreement is virtually agreed” and ruled out a second vote. This has inspired some confidence after reports last week that 80 Tory MPS rejected her ‘Chequers’ proposal.

An appreciating British Pound is weighing down on the US Dollar which is also having knock-on effects for alternatively high-yielding currencies. This is pushing the Australian and New Zealand Dollars slightly higher. Speaking of those two, Tuesday’s trading session offered broad gains to pro-risk FX while undermining their anti-risk counterparts.

Despite Donald Trump proceeding with slapping $200b in Chinese import tariff, the markets virtually brushed off this announcement as the S&P 500 pared Monday’s losses. This may have been due to the Trump Administration taking on a relatively softer tone than what was originally anticipated. AUD/USD rose and appears to have pushed above the neckline of a head and shoulders bullish reversal pattern.

Meanwhile the MSCI Emerging Markets ETF gapped and traded higher. This was also despite Chinese tariff retaliation which was announced shortly prior to Wall Street opening bell. China will apply levies on $60b of US goods starting on the same day the US will impose $200b, September 24th. Meanwhile USD pared some losses after a local 4-week Treasury bill auction drew a higher yield despite rising demand.

Ahead, the Japanese Yen may look past this month’s BoJ monetary policy announcement as no major change is expected there. Back in July, the Bank of Japan tweaked their policy settings but the Yen weakened as estimates for reaching sustainable 2 percent inflation were pushed further out. With that in mind, the markets will likely be driven by updates that can affect sentiment rather than economic data.

GBP/USD Technical Analysis – 1.3317 Next?

GBP/USD prices have pushed above a descending range of resistance from May, opening the door to further upside gains. This reverses the British Pound’s dominant downtrend since then. With that in mind, the next target could be the 38.2% Fibonacci retracement followed by the 50% midpoint at 1.3520. Meanwhile, immediate support is the 23.6% retracement at 1.3067.

GBP/USD Daily Chart

Stocks Brush off Trade War. Brexit News Boosts GBP, Uptrend Grows

Chart created in TradingView

US Trading Session

Stocks Brush off Trade War. Brexit News Boosts GBP, Uptrend Grows

Asia Pacific Trading Session

Stocks Brush off Trade War. Brexit News Boosts GBP, Uptrend Grows

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

FX Trading Resources

--- 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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