GBP/USD Dips on Brexit Woes as USD/JPY Falls on Trade War Fears

Asia Pacific Market Open Talking Points

  • British Pound slumped as “no-deal” Brexit fears simmered
  • S&P 500 dipped on US-China tensions ahead of trade talks
  • GBP/USD may extend declines on bearish contrarian bias

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British Pound Dips as No-Deal Brexit Bets Rise

The British Pound slumped as the latest Brexit news underpinned concerns about a “no-deal” withdrawal from the EU at the end of this month. Earlier in the session, talks between UK Prime Minister Boris Johnson and German Chancellor Angela Merkel were tense over disagreement about whether Northern Ireland should be kept in a customs union after Brexit. Mr Johnson said a deal is “essentially impossible”.

Check out our special glossary to learn more about Brexit jargon and key terms

Meanwhile, stocks fell as tensions between the US and China heated up ahead of critical trade talks at the end of this week. After the former threatened to blacklist companies from the latter over human rights violations, Chinese officials said to “stay tuned” for retaliation. Beijing urged Washington D.C. to withdraw its decision. White House Trade Adviser Peter Navarro said these actions were unrelated to trade talks.

The anti-risk Japanese Yen and haven-linked US Dollar cautiously rose as the S&P 500 slumped 1.56 percent. Commentary from Fed Chair Jerome Powell did little to calm investors. Mr Powell reiterated that the central bank will act as appropriate and that they will carefully monitor incoming information. He added that monetary policy is not on a preset course.

Wednesday’s Asia Pacific Trading Session

With that in mind, we may see Asia Pacific equities follow Wall Street lower as risk aversion extends into another tense trading day. That may in turn continue driving the anti-risk Japanese Yen higher as USD/JPY faces a long-term bearish technical setup heading into 2020. Meanwhile, the sentiment-linked Australian and New Zealand Dollars may underperform. The former has local consumer confidence data to digest ahead.

British Pound Technical Analysis

As the October 31 Brexit deadline nears, GBP/USD is finding itself resuming the dominant downtrend since March. This followed a retest of descending resistance during the middle of September – blue line on the chart below. Prices are now eyeing near-term support around 1.2109 – March 2017 lows. This is also supported by a bearish-contrarian GBP/USD trading bias from the latest IG Client Sentiment report.

Join me on Wednesday’s at 00:00 GMT as I uncover what IG Client Sentiment is offering on trends in forex!

GBP/USD Daily Chart

GBP/USD Dips on Brexit Woes as USD/JPY Falls on Trade War Fears

Chart Created Using TradingView

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— Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

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