October 13, 2020 5:34:20
Market Update 13th October 2020
The GBP and EUR have remained in the green this week despite the looming Brexit deadline day on Thursday. The UK’s self-imposed deadline day is not weighing down the GBP, possibly due to the fact the market does not believe the UK will leave the EU on Thursday, or the market is expecting some sort of a trade deal to be reached.
What has happened leading into the previous deadlines is the discussions get extended, and the deadline gets postponed. The major risk to the market right now, outside of the US stimulus negotiations, is the possibility of the UK sticking to the deadline and walking away from negotiations with the EU.
Thursday could be a make or break day for the GBPJPY and EURJPY. All eyes will be on the EU Council meeting on Thursday. Interestingly, the EURJPY and GBPJPY are creating flag like structures, which could be taken as bearish.
GBPJPY
The GBPJPY is trading between a rising channel formation. Technical traders could see this as a possible bear flag formation. However for this structure to be confirmed, the market would need to break below the inclining trendline support. A break prior to the Thursday meeting could be taken as premature, as the market will need a catalyst for the breakdown.
EURJPY
Similarly, the EURJPY is creating a rising wedge/bear flag formation. We may see price compress even further into the structure leading into the deadline day. If we see a break to the upside of the structures we can conclude the bullish trend will remain intact. A break to the downside could open the flood gates for a sizeable drop.
More to come on Thursday!
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