Parliament Blocks Brexit Deal
Benchmark equities indices have been broadly higher this week as markets react to the latest headlines around Brexit. Following the Saturday sitting of parliament which saw the UK PM fail to pass his deal, a further extension to Article 50 has been requested by the UK. While the EU has not yet granted the extension, it has confirmed that it is considering it and traders are displaying optimism that the EU will go ahead with the request.
If Article 50 is extended again, although frustratingly prolonging the situation ultimately it will be beneficial for markets as the UK will once again avoid an economic cliff-edge. Traders expect that the EU will grant the requested extension as it too will want to avoid the economic fall-out from a no deal Brexit.
The UK is currently due to leave the EU on the 31st of October. However, if the EU grants the requested extension, that date will shift to the 31st of January 2020. With the UK likely to see elections held before that period, there is a growing risk that a second referendum will be introduced (should the labour party win the election) which could see Brexit revoked altogether. As such, markets are today reflecting a better mood.
The ECB is due to meet this week and while no further easing is expected, markets will be eager to hear the bank’s latest assessment given the recent string of weaker-than-expected data our of the eurozone. A raft of key indicators have deteriorated, headlined by Eurozone manufacturing hitting cycle lows of September.
The trade-war negotiations between the US and China have taken a backseat for now given the looming Brexit deadline. However, deputies from both countries are due to speak this week ahead of further talks planned ahead of the APEC meeting in November where Trump is hoping to sign off on the mini trade deal agreed on October 10th.
Technical & Trade Views
DAX (Bullish above 12667)
From a technical and trading perspective. DAX has broken above the monthly/yearly R1 at 12667. With Longer-term VWAP positive, bias remains bullish in the near term. I will be watching any retest of the broken R1 for long opportunities, expecting the bullish trend to continue.
S&P500 (Bullish, targeting 3031)
S&P500 From a technical and trade perspective. Price has broken above the monthly pivot and with longer-term VWAP supportive, further upside is likely. Expect some initial resistance between the weekly R1 and year to date highs, but ultimately, view remains bullish looking for a renewed push higher towards the monthly R1 at 3031
FTSE (Neutral, Bullish above 7063, bearish below)
FTSE From a technical and trading perspective. The rally in GBP is pulling UK equities lower. Longer term VWAP has flipped negative suggesting we could see another step down. If we break back below the yearly pivot at 7063 I will be monitoring a retest for short opportunities. Risk to this is bullish divergence at recent lows which could see further upside
Nikkei (Bullish above 21600)
From a technical and trade perspective. Price is still challenging the September highs. With momentum studies flagging divergence there is risk of a pullback though any move back towards VWAP should find support. With longer-term VWAP still bullish, I am anticipating further upside targeting the monthly R1 at 22691 initially.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
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Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!