EURUSD and German 30 Index

The markets are now squarely focussed on Brexit after a weekend of drama and expectation. The marathon Brexit talks are taking place in Brussels after the UK negotiation team arrived over the weekend to attempt to hammer out a deal. The sense now that the talks are in the eleventh hours is palpable and there is a great pressure on everyone involved to attempt to find a compromise. There were reports from the Times yesterday that German Chancellor Merkel and French President Macron were to soften their stance on the level playing field but this is questionable as it has been a red line issue for the EU. The trust that the EU placed in the UK was damaged by the UK Governments Internal Markets Bill which is back in the House of Commons. The report also came with a caveat from France, warning they were ready to abandon talks and prepare for a no-deal Brexit. A separate report stated that the UK will drop the controversial clauses in the Internal Market Bill if a free trade deal is reached, and if parallel discussions on the Northern Ireland Protocol yield long term and legally sound solutions to the contentious aspects of the Protocol. Another report from the Guardian stated that the two sides have all but finalised the terms of access for EU boats in UK waters. This being called a major breakthrough in the report but a newswire also quotes a UK government source who says there has been no breakthrough on fishing. Irish Taoiseach Micheal Martin has accurately described talks as being on a knife-edge as there are reports and counter reports emerging from various sources. However, there is optimism that there is no smoke without fire and progress is being made. Today is supposed to be the deadline for talks to produce a deal. In the US on Friday Non-Farm Payrolls data showed a collapse in the amount of new jobs created with a fall to 245K against the expected 480K. The previous read of 638K was revised down to 610K. However, the Unemployment Rate fell to 6.7%, beating the forecast of 6.8% and the prior 6.9%. Today the Japanese 225 Index closed down -0.76% today. The Hang Seng is lower for today at 1.4% but the Shanghai Composite is trading up at 0.6%. USDJPY is trading at 104.130 while Gold trading at 1840.00 currently. European Futures are trading lower by over -0.4%.

On the calendar for today Eurozone Sentix Investor Confidence is expected to fall to -11.9 from the previous reading of -10.0. In the afternoon, Canadian Ivey PMI is expected to be released. US Consumer Credit is expected to rise to 17.6B from 16.2B.

EURUSD

The EURUSD pair is now testing resistance around 1.2140. The pair found support at the 1.1602 level and at the 1.1615 level last month. The 1.2100 area is acting as initial support followed by the 1.2012/1.2000 area. Below this, the 1.1966 and the 1.1920 level may provide support ahead of 1.1900. Support has been seen around the 1.1850 and 1.1800 levels followed by the 1.1740 area. Below 1.1700 the 1.1650/1.1640 area failed support to the pair. Below the current level support may be seen at 1.1600 and 1.1550 ahead of the 1.1500/1.1495 area. The 1.1422 lower high may offer support above 1.1367. Further support may be seen at 1.1300 and 1.1240 followed by 1.1200. Any break down below these levels may lead to a move towards 1.1150 and the 1.1145 level. Below this level of 1.1150 area, support potentially comes into play at the 1.1120 level ahead of 1.1100. Further support may arise at the 1.1020 area and the November 2019 low at 1.0981. The 1.0900 level and the 1.0870 area may provide some support but the 1.0700 round number may be used if the selloff breaks the low area around 1.0800. Price action has found support around the February low of 1.0777, using this area to build a base and creating further support at 1.0727.

The breakout higher from the 1.1900, has resulted in price action testing the 1.2180 area. However, price has fallen back to 1.2120 and is probing the 1.2100 area as support. A fall back to 1.2000 may be used as support, with the September high at 1.2011. A move back higher from there may see some resistance at 1.2050. Beyond this, the 1.2080 area may be resistive. The 1.2100 level is followed by potential resistances at 1.2155, 1.2180 and 1.2200. Above these the 1.2250 level comes into play followed by 1.2275 and 1.2300.

German 30 Index

The German 30 Index sold off from the 13830.00 all time highs in February, and found support in the 8000.00 area in March, but has since retraced and the index is now trading around the 13215.00 area after creating lower highs at 13460.00 and 13400.00. Current resistance may be seen around the 13400.00 area followed by the 13300.00 level. A resumption of the bullish trend would require buyers to break the resistance around the 13300.00 level and push price higher into the 13460.00 area. The consolidation that has gripped this index continues and traders are watching to see if the index can create another higher high in the sequence. The next area of potential resistance beyond the top of the range at 13450.00 can be found at 13560.00. The resistance ahead of the market top formed at 13500.00 and is followed by the 13750.00 area. From there the high at 13830.00 level comes into focus.

The market is favouring bulls but is still technically neutral. Support at 13200.00, 13000.00 and 12920.00 may be used followed by 12650.00. A build-up of support from 12500.00 to 12300.00, including the rising trend line, may be used by market. A confirmed loss of the 12340.00 area opens the way to 12000.00 followed by 11500.00. Below this, the 11340.00 area comes into play followed by 11000.00. The 10850.00 region has been used as support and resistance on the chart and may be engaged by traders. Below this level, the 10135.00/10000.00 area may also provide support but a loss of this area may open the way for a retest on the 9375.00 zone followed by the 9000.00 support area. A breakdown from this area may engage the supporting lows at 8917.00 and 8436.00, with a loss of this support potentially opening the way to test the 8000.00 level followed by the 7700.00 area.

Philip Konchar

Core Spreads

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