On Monday, many market participants expected a highly volatile trading week, especially in the GBP pairs. While the were some hectic movements in Cable, it was hardly the kind of volatility that traders were bracing prior to the Brexit vote.
The outcome of the votes ended up being GBP-positive, as the market sees the risk of a no-deal Brexit lower than before. Nevertheless, the situation remains uncertain and GBP bulls should not be overly confident.
Cable is currently testing the falling trendline from the September high. A clear break above that line and resistance at 1.30 could lead to a short squeeze and force more GBP bears into position covering. The next notable resistance level would then lie around 1.3170.
Meanwhile, the consolidation in the other major currency pairs continues. USD/JPY extended gains slightly as the rally in the equity markets supported the pair. However, EUR/USD traded within a 30 pips range and AUD/USD is still struggling with resistance at 0.72.
US stock indices rallied following news that the US is considering lifting some of the trade tariffs aimed at Chinese products. However, this was quickly denied by officials. The S&P 500 still managed to close the day 0.76 % higher, as solid corporate earnings provided some support.
The DAX finished the trading day slightly higher too, but is still struggling with heavy resistance ahead of the 11,000 level. It will take a clear break above that level for bulls to regain some confidence.
The Session Ahead:
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