British Pound Turns Volatile As Brexit Talks Inconclusive

The British pound was seen trading volatile as the currency pair gave up the gains intraday. This came after news reports emerged that the UK and the EU talks turned inconclusive. The British PM May was in Brussels yesterday to meet with Juncker and discuss the Brexit bill and the Irish border.

In the U.S. the passage of the tax reforms bills boosted the Greenback. Investors expect that the tax cuts will help the U.S. economy while also increase the pace of rate hikes. The news helped stall a three day decline in the U.S. dollar.

On the economic front, the U.S. factory orders showed a 0.1% decline on the month. This was slightly better than the 0.3% decline that was forecast. Previous month’s revised data showed an increase of 1.7%. In the UK, the construction PMI was better as data showed an increase to 53.1 beating forecasts of 51.2 and up from 50.8 previously.

Looking ahead, the economic data today will see the UK’s services PMI and the non-manufacturing PMI from ISM. Earlier in the day, the RBA’s monetary policy meeting showed interest rates staying unchanged at 1.50%.

EUR/USD intra-day analysis

EUR/USD 4 Hour Chart

EUR/USD (1.1873): The EUR/USD closed almost flat yesterday after gapping down on Monday’s open. The currency pair however remains supported to the upside in the short term. The decline to the 1.1843 support is consistent with this view. There is scope for the euro currency to retrace the declines and probably rise towards Friday’s close at 1.1898 to fill the gap. Price action remains supported above 1.1843 in the near term. Resistance at 1.1920 is likely to keep a lid on any further gains. A breakout from this range is expected which could set the near term bias in the currency pair.

USD/JPY intra-day analysis

USD/JPY 4 Hour Chart

USD/JPY (112.49): The U.S. dollar rose to a one-month high yesterday but price closed bearish towards the end of day. Failure to maintain the gains saw USD/JPY reversing gains below the 113.00 handle. We expect the near term declines to push USD/JPY back towards the 112.04 level of support. The unfilled gap from Friday’s close also resides close to this level which validates this view. Alternately, if the bullish momentum resumes, we could expect USD/JPY to test the 113.00 resistance level on a convincing close above 112.65 level of minor support and resistance.

XAU/USD intra-day analysis

XAU/USD 4 Hour Chart

XAU/USD (1275.40): Gold prices continue to remain flat with price action showing strong consolidation near the 1274 level of support. Failure to establish a clear trend suggests that the sideways price action might continue. Below the 1274 support, gold prices could be at risk of posting a decline towards the 1262 support level. To the upside, the 1285 resistance is likely to maintain the gains in the near term. On an intraday basis, gold prices could be seen posting a modest rally to fill Friday’s gap at 1280.46 but further gains beyond this could be limited.

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