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This week all the headlines were focused towards Brexit as Prime Minister May sought to come to some agreement with the EU over the Irish backstop. Earlier in the week it looked likely that the Brexit deadline would be delayed, and PM May would receive reassurances over the Irish backstop which caused the GBP to rally significantly. This turned out to be the start of the rollercoaster for GBP this week as it soon fell just as fast due to a vote in the house of commons rejecting PM Mays deal once again. The idea of a no deal Brexit however has resurfaced as the members of parliament voted on a Brexit extension, which was bought forward by the Labour party who subsequently lost the vote, leaving a no deal Brexit on the table.
In other news Fed Chairman Powell spoke earlier in the week suggesting the US economy continues to grow however they are keeping a close eye on inflation targets and that a rate hike will only be possible if targets are met. However, Core CPI data (a lead indicator for inflation) came in lower than expected at 0.1%. This saw the USD decline further with the Dollar Index showing price falling back into the key support of $96.60. In other US news the negotiations between President Trump and China have been delayed by 4 weeks which left investors wondering if a deal was close between the two nations.
China data continued to show weakness in the economy as Industrial Production fell from 5.7% to 5.3%. This slowdown in China did affect the Australian Dollar through the Asian trading session however the currency soon bounced back.
In Europe CPI data showed some growth in the economy giving the Euro a boost against the USD with price trading back above the key 1.1300 resistance.
The US Dollar Index shows price rejecting the key resistance around $97.50. We could expect the USD to remain within this range and for price to continue back towards the $95.00 demand zone.
AUDUSD has form a bullish candle off the key demand zone this week and with seasonality suggesting we could see further upside, price looks likely to test the key weekly trendline resistance.
In last week’s market outlook, we discussed that we could see USD weakness and that the EURUSD currency pair could trade back towards 1.1300 as the weekly chart closed back within the 1.1200 lows. As we can see the market did move higher and the price is now trading back above the 1.1300 resistance. If price closes here for the week, we could see further upside with price remaining within the range.