Forex Forecast: Pairs In Focus - Sunday, Dec. 9

Brexit remains an unknown, as the British Parliament prepares to vote on the draft Brexit later this week. It currently looks as though the Government will not be able to secure approval of the deal and then anything could happen, from no Brexit to a “no deal Brexit”. Either extreme scenario should be expected to produce a strong directional movement in the British Pound.

The fundamental outlook on Canada is mixed after its central bank produced a more dovish than expected report last week, but this was followed by very strong employment data.

Technical Analysis

U.S. Dollar Index

The weekly price chart below shows that after last week’s weakly bullish candlestick, this week printed another weakly bullish candlestick which failed to break above the resistance level shown in the price chart. The price remains within a multi-week consolidation between support and resistance and I have no strong confidence as to short-term direction, although the edge is still technically in line with the long-term bullish trend, which remains intact. It is now looking a little more likely that the bullish trend will continue.



The weekly chart below shows last week produced another bearish candlestick, but it is a near-doji which suggests that it may be ambiguous. This is a continuation of the general long-term bearish downwards trend which has slowed but seems to still be intact. However, bears should watch out for potentially strong support below as these are 1-year lows. The biggest problem is that the relative value of the Pound is almost entirely driven by the terms upon which the U.K. will eventually depart the European Union, and this is subject to political uncertainty. If the British Government loses the vote on Tuesday very heavily, we can expect to see the Pound break down to new long-term low prices in line with the long-term trend. Due to the uncertainty, “set and forget” trades on the Pound are not advisable.

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