Brexit: The Cabinet approved a plan for Brexit. Why is the question of the border with Ireland so important?

It became known that the Cabinet of Ministers of Great Britain was supported by the plan submitted by Prime Minister Theresa May to withdraw from the European Union. This will allow to count on the fact that the situation on Brexit will be resolved before the expiration of the time when the UK will officially leave the EU.

Such news, of course, supported the British pound, which returned to the area of weekly highs paired with the US dollar. However, as I noted in recent forecasts, the main problem for the British Prime Minister remains the approval of this agreement in parliament, where there are very many opponents of not even the agreement itself, but Brexit.

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Theresa May said yesterday that the cabinet had a lengthy and detailed discussion of the draft Brexit agreement and ultimately approved the draft agreement. In her opinion, the agreement reached during the negotiations is the best scenario for the UK to leave the EU. May also said that the draft agreement will be submitted to the parliament today.

It is necessary to pay attention to the fact that even before the meeting of the Cabinet of Ministers, the British Prime Minister had already started having problems, although the Cabinet belongs to her party. The small Northern Ireland party, which, by the way, provides May with a majority in parliament, completely rejected its draft agreement. The representative of this party, Jeffrey Donaldson, said that the current plan undermines the constitutional and economic foundations of Great Britain. Even some Euroskeptics from the Conservative Party rejected the deal. Jacob Rees-Mogg stated that the plan was incapable of providing Brexit. However, as we already know, the cabinet still approved the current exit scenario from the EU.

There is much talk about the problem of reaching an agreement on Brexit, and the main reason experts point out the Irish border, on the issue of which it was difficult to reach a consensus. So what is it about it that took so much time to solve this problem?

It should be recalled that the sharp conflict over the status of Northern Ireland as a province of Great Britain was extinguished in the late 1990s. The agreement stipulated the elimination of the border between Northern Ireland and the Republic of Ireland, which allowed EU members to trade goods and services without restriction with each other. Now, when the UK leaves the EU, Brexit will change the principles of trade between the EU and the UK, which will again restore the border, which could turn into a conflict in Ireland.

As for the technical picture of GBP / USD, a breakthrough of resistance at 1.3040 will be a good prerequisite for the continuation of the strengthening of the trading instrument to the highs of 1.3100 and 1.3170. The main driver of growth for the pound in the first half of the day can serve as a report on the volume of retail sales in the UK. In the case of a pair decline, the bulls will return to the market on the test of support 1.2960 and slightly lower, from the minimum of 1.2890.

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EUR: The growth potential of the European currency has declined. The Fed may raise rates at any time.

The European currency continues to attempt to strengthen in tandem with the US dollar. Yesterday's data on inflation in the United States did not lead to significant changes in the market, as they coincided with the forecasts of economists.

According to a report by the US Department of Labor, CPI in October of this year rose 0.3% from the previous month. Core inflation, which does not take into account the volatile categories of food and energy, rose 0.2%. The data completely coincided with the forecasts of economists. Compared with the previous year, the CPI index in October rose by 2.5%, while the base CPI increased by 2.1%.

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During his speech yesterday, the Fed chairman said that inflation rates correspond to the target level of the Fed and there is a reason to believe that the situation in the economy will continue to evolve according to a positive scenario.

Powell also noted that market participants should be prepared to raise the Fed's rates at any meeting, as he is very pleased with the state of the US economy. A gradual increase in interest rates is necessary in order to balance the risks.

As for the technical picture of the EUR / USD pair, the upward potential remains as long as the trade is conducted above the support level of 1.1300. The breakthrough of resistance in the area of 1.1350 will cause a new upward wave in the trading instrument, with the highs of 1.1380 and 1.1410 being updated, which will lead to the final reversal of the past downtrend that is now under threat.

Data on the volume of retail trade in the United States, which will be published in the afternoon, can support the US dollar. The inability of buyers of risky assets to get out beyond the resistance of 1.1350 in the first half of the day, paired with US data, can play a cruel joke for the European currency, which will return EUR / USD to the 1.1270 and 1.1230 lows.

The Australian dollar strengthened its position against the US dollar today after the release of a report indicating a good state of the Australian labor market, which shows good activity against the expectations of economists.

According to the Ministry of Labor, unemployment in Australia in October of this year remained at its minimum in the region of 5.0%, and the number of full-time jobs increased immediately to 42,300. Economists had expected an increase in unemployment to 5.3%.

It should be noted that a good growth in the labor market only confirms the correct approach of the Governor of the Reserve Bank of Australia. I recall that Philip Lowe is a supporter of low-interest rates, which are now at the level of 1.5% and are unlikely to be changed in the near future. At the same time, a good growth in the employment market may in the future lead to the acceleration of inflation, which will still force the RBA to reconsider its approach to monetary policy.

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Trading Plan for 11/15/2018

Something unbelievable happened to the pound yesterday, and the reason lies solely in the statements regarding Brexit. At first, the pound continued to grow amid expectations of signing an agreement between the UK and the European Union, which the cabinet did. Then it rushed down as due to inflation data, which showed its invariance instead of growth, and thanks to the statements of a number of parliamentarians. The fact is that even though the government signed the agreement, it will enter into force only after its adoption by parliament. There can be difficulties, since Theresa May, in fact, relies on a minority of parliamentarians. The majority is extremely hostile towards the Prime Minister, since, in their opinion, the agreement contradicts the interests of Great Britain. In general, they say, Theresa May is cursing in front of Europe and making concessions, instead of demanding that an agreement is drafted, which primarily meets the economic interests of Great Britain. Well, what to do if many still experience phantom pains due to the loss of the empire. So, these same parliamentarians said that today they will submit a question of a vote of no confidence to the Prime Minister. So, we can expect an incredible show, and, instead of a vote on the agreement, everything can turn into a government resignation and the announcement of the date of early elections. However, at the end of the day, the pound completely won back all the losses, because it is not clear how everything will turn out, and a number of other parliamentarians, who are also hostile to Theresa May, nevertheless declared that the worst development should be avoided.

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It is worth noting that the single European currency reacted extremely positively to the signing of an agreement between the UK and the European Union, although the second estimate of GDP for the third quarter confirmed a slowdown in economic growth from 2.2% to 1.7%. Yes, and the growth rate of industrial production remained unchanged. However, the apparent uncertainty in the United Kingdom scares many. The current text of the agreement is rather in the interests of the European Union, and if the British parliament does not accept it and the "divorce" takes place without an agreement, then Europe will even more likely benefit from it even more. Against this background, data on inflation in the United States almost imperceptibly passed, showing its growth from 2.3% to 2.5%, which removes any doubts about the rate of increase in the refinancing rate by the Federal Reserve System.

Although the main events will unfold in the British Parliament, it is worth paying attention to data on retail sales in the UK and the United States. In the first case, their growth rates should remain unchanged, while in the second, a slight slowdown is expected. But what happens today in the UK is simply unpredictable, and completely different options are possible.

The pound / dollar currency pairs showed high volatility on the information and news background, where the amplitude relative to the 1.3000 / 1.3050 range is more than 150 points, ultimately remaining within this level. Probably assume a temporary stay in this range, until the next burst from the information background.

The euro/dollar currency pair, like its fellow pound / dollar, was exposed to the information background, as a result of overcoming the level of 1.1300 in the upward direction. Now, the quotation is already at 1.1340, where there is an attempt to slow down, but the ambiguity of Brexit, after all, worries investors, and you can expect everything.

The general recommendation on two currency pairs is to take a waiting position and watch what is happening from the outside. There is a risk of a pulse stroke both up and down.

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Fundamental Analysis of AUD/JPY for November 15, 2018

AUD/JPY has been quite impressive with the recent non-volatile and impulsive bullish pressure which led the price higher toward 82.00 with a daily close. The positive reports on Australia's labor market helped the currency to gain momentum over JPY which has been struggling due to lackluster economic data.

AUD has showing predictable dynamic amid better-than-expected data which lead to certain gains on the AUD side. Today Australia's Employment Change report was published with a significant increase to 32.8k from the previous figure of 7.8k which was expected to be at 19.9k and Unemployment Report was unchanged at 5.0% which was expected to increase to 5.1%. Moreover, RBA Assistant Governor Debelle expanded on the housing lending issue when he spoke about the repayment problems of borrowers. So, he suggested certain policies to reduce future shocks due to lending and monetary policy issues.

On the JPY side, recently Prelim GDP report was published with a decrease to -0.3% as expected from the previous value of 0.7% and Prelim GDP Price Index also fell to -0.3% from the previous value of 0.0% which was expected to be at -0.1%. On the back of finance sector issues, JPY is expected to struggle further until decent economic data is released in Japan.

Meanwhile, AUD is expected to continue dominating JPY further in the coming days amid the fundamental strength, while JPY is struggling to maintain the momentum. Until Japan comes up with better economic data, Australia's positive employment reports provides AUD with solid support in the coming days.

Now let us look at the technical view. The price is currently residing above 82.00 area with a daily close while having certain retracements along the way. As per current price action context, the price is expected to push higher towards 83.50 area in the coming days. As the price remains above 80.50 area, the bullish bias is expected to continue.

SUPPORT: 80.50, 82.00

RESISTANCE: 83.50, 85.00

BIAS: BULLISH

MOMENTUM: IMPULSIVE and NON-VOLATILE

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GBP / USD. 15th of November. The trading system. "Regression Channels". The Cabinet of Ministers accepted the terms of Theresa

4-hour timeframe

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Technical details:

The senior linear regression channel: direction - sideways.

The younger linear regression channel: direction - up.

Moving average (20; smoothed) - sideways.

CCI: 53.0811

The currency pair GBP / USD on Thursday, November 15, resumed its upward movement after a "storm" environment. During the past day, the pair was thrown from side to side, and the volatility was very high. We wrote about this version of the development of the event the day before. Now for the pound, the decisive days are coming when, in any case, there will be information from the British Parliament about the consideration of the bill of Theresa May on the conditions of Brexit, first by the Cabinet and then by the Parliament. The first news, unofficial, is that the Cabinet of Ministers tentatively adopted Theresa May's plan, but after a very long debate. The ministers accepted May's position and agreed that either the country would leave the EU on the conditions proposed by the prime minister, or there would be no "deal" at all. At the same time, it is noted that a sufficiently large number of politicians were against the conditions proposed by May. There are still rumors that Ms. May may be dismissed, for this you need the signatures of 48 members of the Conservative Party. Now, the ministers will have to decide on the final version of the document, and after that, the parliament will vote. However, this event may take place in December. In general, despite the fact that there is some progress in this matter, the whole process continues to drag on.

Nearest support levels:

S1 - 1.3000

S2 - 1.2939

S3 - 1.2878

Nearest resistance levels:

R1 - 1.3062

R2 - 1.3123

R3 - 1.3184

Trading recommendations:

The currency pair GBP / USD has fixed above the MA, thus, long positions with targets at 1.3062 and 1.3123 are now relevant. Today, it is recommended to pay attention to the publication of reports on retail sales in the UK and the States.

Sell positions can again be considered after reversing the pair below the moving average line. This is a very likely scenario, as the positions of the pound sterling remain very unstable.

In addition to the technical picture should also take into account the fundamental data and the time of their release.

Explanations for illustrations:

The senior linear regression channel is the blue lines of the unidirectional movement.

The junior linear channel is the purple lines of unidirectional movement.

CCI is the blue line in the indicator regression window.

The moving average (20; smoothed) is the blue line on the price chart.

Murray levels - multi-colored horizontal stripes.

Heikin Ashi is an indicator that colors bars in blue or purple.

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