Above: The headlines suggest that E.U. Leaders rejected Prime Minister's proposal in May to break Brexit's dead spot. Picture © European Council.
– British Pound benefits from a positive technical trend against the euro
– But future benefits require a break above 1,1510 for confirmation
– Weekend holders are negative for Sterling at the beginning of the new week
The pound sterling starts the new week in 1,1446 against the euro; which disappeared one month higher in 1,1507 the previous week but well above the month-low in 1,1278 recorded on November 1.
The trend is, therefore, positive for Sterling, but the currency could be a smooth start for the new week thanks to headlines that suggest the UU. They rejected the proposals of the US Prime Minister. UU. who sought to break the deadlock in the Brexit talks on the Irish backstop issue.
"The treatment of Theresa May de Breit fails while the UU" disables vital support, "informs the Sunday times; a title that will surely see the markets' exposure to the US currency in the short term
"This weekend high EU officials sent shock waves through No. 10 rejecting the May plan, causing fears that negotiations broke days before the cost-free preparations that cost billions would have to be implemented "says Caroline Wheeler, deputy political editor or Sunday Times.
The foundations are, therefore, clearly bearish; although the technical configuration that supports Sterling is positive and if the markets consider that a business is still likely in spite of the countermeasure involved in the holders, the possible subsequent profits are possible.
Our technical studies show that the Pound-to-Euro exchange rate will likely continue to rise in the next week as the established trend is extended in the short term.
"One of the main advantages when looking at markets from the point of view of technical analysis is that a narration is not necessary to understand market sentiment," says Piotr Matys, analyst at Rabobank, explaining how the technical analysis represents the advantage of cutting off the confusing noise that the owners could deliver.
We suggest that those who look at Sterling exchange rates weigh the technicians against holders when making judgments about currency prospects.
The couple just broke inside the channel that was once negotiated during the first half of the year, this happens after it was temporarily broken during the summer, now it turned back indoors, which is a moderately bullish sign for the duo.
The GBP / EUR also lost the 50-week moving average (MA), another bullish signal for the exchange rate.
A negative signal is a standard candlestick star shooting bearish on the weekly chart, but it is too early to say whether this suggests a greater weakness or not.
Normally, shooting stars require confirmation of an additional decline over the subsequent period, so confirmation does not adjust depends on the activity this week.
In general, in balance, we wish to improve a descent above the 1,1510 maximum for the confirmation of the forward towards a goal set in 1.1590. This technical confirmation is necessary due to the high risks suggested by the Brexit owners.
1.1590 is directed because it is where the monthly pivot of R2 is located and it has a tough resistance to the continuation of the high tendency.
The moment, measured by RSI on the lower panel, is diminishing but not conclusive.
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The pound: what to look at
The main driver of the Libra next week is likely to be news from Brexit.
It seems that a withdrawal agreement is at the table, the Libra will rise and vice versa if it is the opposite.
The Sunday Times holders are really worrisome: if true, it may be the case that Theresa May talks about the negotiations, as she simply can not gather parliamentary support for a tremendously unpopular agreement in the form of a coin. Proposals that risk the United Kingdom to be subjugated to the EU law indefinitely.
However, we always knew that these negotiations would go down and with December being the final deadline we will not be surprised by these negative headlines.
The markets could be accused of becoming too optimistic in the state of the Brexit negotiations at the end of the year. To the uu always negotiates until the end; and we are seeing only this.
This is also possible that the benefits of any agreement may be short-lived, although the government announces an agreement that will still have to obtain Parliament's approval and this could be an arduous process, which presents a risk to Sterling.
The conservative government only has a small majority and depends on the support of the DUP and of each one of the deputies, reason why there is the risk that if the rebels DUP or Brexit vote against the Theresa May agreement it can consider that it does not have majority to push it, and this could weigh in the pound.
In the face of difficult data, one of the most significant releases of the previous week is likely to be inflation data for October, which, according to the consensus of the market, is expected to show a 0.2% increase in one month per month (mother) and a 2.5% increase on the year base (year) (for general inflation) when it is published on Wednesday at 9.30 GMT.
An outcome in line with expectations would probably be bullish for Sterling, as higher inflation puts the pressure on the central bank to increase the interest rates that the currency appreciates.
This is because higher interest rates tend to attract more foreign capital inflows attracted by the promise of higher returns.
However, there is a chance that inflation defrauds because of the growing influence of the cheap pound that was grateful for Brexit's hopes. The IPC title has already dropped from a 3.0% penny in January due to the rebound in Pound, so it is possible that there will be more losses, although the comments of the Bank of England (BOE) are somewhat unlikely.
"At its last meeting, the Bank of England (BoE) said it did not expect inflation to fall much further, price growth remained fairly close to the 2% target," they say Wells Fargo in a note to customers.
Another important release for the pound is the labor market that leaves Tuesday at 9.30. Probably of greater importance to Sterling is the middle income component due to its influence on inflation. The current expectation represents a 3.0% increase in Profits (including bonuses) and an increase of 3.1% in profits, excluding bonuses. An outcome in line with expectations could be positive for Libra, as it will reflect an even greater increase in real earnings since the fall of inflation since the peak of January.
Other results of the note in the labor report are unemployment, which is expected to remain at 3.0% and the change in employment, which is expected to increase by 34 kilometers.
The big final release for the pound is retail on Thursday, which is expected to show a recovery of 0.2% in October, from a weak level of 0.8% previously and an increase of 2.8% from 3.0% previously, when it was released at 9.30. GMT.
The Euro: What to look for
A strong driver for the Euro next week is likely to be Italian politics as the government reaches the deadline to submit its revised budget to the European Commission on Tuesday, November 13.
However, reports in Italian newspapers suggest that the government only made few adjustments to the budget and left the deficit of 2.4% in its place. This is likely to lead to a greater decline between Rome and Brussels and potentially higher volatility for the Euro.
The European Commission is considering imposing sanctions on Italy if it does not throw a ball, including a fine equivalent to 0.2% of economic production, or the withholding of EU funds destined for programs in the country.
Recent GDP data for the euro area in Q3 shows that Italy slows down other members of the core with zero growth in the third quarter. Instead of encouraging prudence, however, it had the opposite effect on the members of the Italian government now more interested in increasing the cost to inject some fiscal stimulus into the planned economy.
"We are seeing the economy slower, therefore, even more reason (for an expansive budget)," said the vice president of the league, Massimo Garavaglia.
In the face of difficult data, the Euro could also be moved by some very important data.
Although only flash estimates revisions: Q3 GDP on Wednesday at 10:00 GMT and CPI for Thursday's October (also at 10:00 AM) could still affect the Euro if revised from top to bottom.
The low GDP estimate has caused fears that the ECB will not continue with its plans to reduce monetary stimuli. This weighed against the euro, however, if there is an upward revision to GDP it could support the euro.
An important part of the reason for the slowdown was probably due to the increased cost of fossil fuels imported from Russia. However, since the peak of June and September the price of oil has fallen and this can lead to an upward revision.
The September trade balance goes off at 10 in the morning and is likely to show that the surplus is diminishing even more. This is due to the price of oil that peaked in September, and therefore probably eroded the surplus of that month.
The economic feeling survey ZEW, which is an important economic indicator for growth, is Monday at 10:00 a.m.
The ZEW is compared using responses from 350 German finance professionals.
A positive result shows that the balance of the responses was optimistic and vice versa for a negative result. In October the ZEW was -19.4 when investors expressed concerns about international business relations.
Finally, the figures for industrial production in the euro zone for September should be published at 10 am on Wednesday and forecast that the deceleration will be -0.3 after a 1.0% increase in August.
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