Global macro overview for 01/09/2017

Global macro overview for 01/09/2017:

At the beginning of the week, in the shadow of US job market data anticipation, the third round of the Brexit negotiations between the UK and Eurozone has begun. After a week of this process, the negotiations have reached a low point. The officials from the UK's Department for Exiting the European Union (DExEU) have stated that their European counterparts do not have skills to negotiate effectively. The biggest problem for the UK negotiation team, lead by Brexit Secretary David Davis, is the rigid template of negotiations instead of a more loose framework. The consequence is a deadlock in terms of a proper negotiating process that might have significant consequences in the future. Officials seem to have downgraded the definition of "progress" to simply meaning that issues have been discussed and better understood by both sides. The real progress on any of the key separation issues - the Northern Irish border, citizens' rights and the financial settlement - appears almost entirely absent and has not been discussed.

Current Eurozone negotiations scheme allows for only four days of negotiations in a month, so with the current pace of talks, the key issues will likely not be achieved by a key summit of EU leaders in late October. Article 50 precisely stated that the UK must leave the EU by March 2019 by choosing so called soft-Brexit or hard-Brexith path. The longer the time of negotiations, the shorter the timetable for the UK to set in order the negotiation issues and the bigger the uncertainty at the financial markerts (which markets do not like at all). The British Pound might be greatly affected across the board once the negotiations will enter the serious phase too late.

Let's now take a look at the GBP/USD technical picture on the H4 time frame. After the dip below the 61%Fibo at the level of 1.2847, the market quickly recovered, but the bull camp was too weak to take back the control over the market again. The price was capped at the level of 38%Fibo at 1.2961 and then reversed back into the congestion zone. Another breakout below the golden trend line will likely lead to test the recent local low test at the level of 1.2772.


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