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EURUSD correction watch – Brexit cont and a raft of key data tomorrow

jeffriess
October 23, 2019
by Joseph Jeffriess, Market Analyst

Article Recap

Tomorrows EUR High-impact economic news: (None due today)

Busy day data-wise Thursday starting at 6:15 pm French Flash Services PMI – 6:30 pm German Flash Manufacturing PMI, German Flash Services PMI – 10:45 pm Main Refinancing Rate EXP 0.00%, Monetary Policy Statement – 11:30pm ECB Press Conference.

Overnight the solid 5-day run came to an end for the EURJPY, and the EURUSD made the second day of declines after 4 solid days of gains. The EUR dropped a further 25 pips to the USD after Monday’s drop and the EURJPY lost 38.5 pips after a 1.32% 5-day rally. Both pairs have made further declines in today’s Asian session, but late session buyers have started to trim some losses.

Brexit, the neverending Brexit… overnight Boris lost the vote to fast track Brexit law. This continues to drag out the issue with OCT 31 deadline just around the corner. News has been hitting that the EU has been asked for a 10-day extension. Other news has suggested that a new election should be held in the UK if the EU grants a longer extension.

From LiveSquawk;

UK PM Johnson: EU Must Decide On Brexit Extension
– UK Prep For No Deal To Be ‘Accelerated’
– Govt’s Policy Is Not To Delay Brexit

(Reuters) – A new election is the only way to move on from Britain’s Brexit crisis if the European Union agrees to a delay until January, a source in Prime Minister Boris Johnson’s office said on Tuesday, describing parliament as “totally broken”.

Brexit will remain a key for the rest of today’s session, but traders will face a raft of EU data starting at 6:15 pm tomorrow. This includes ECB rate decision, policy statement and press conference. Others to watch will be the German Flash Manufacturing PMI and Services PMI. Doubts and worries remain over the EU’s largest economy, and traders will be looking for decent figures to put down current worries. The ECB later in the night will also be watched closely to see how the current Brexit situation and other influences could play out on ECB policy. The main refinancing rate is expected to stay at 0.00; any action will be in the policy statement and press conference. This will be Mario Draghi’s last policy meeting before his term ends on October 31st. His successor is Christine Lagarde.

Taking a look below at the daily EURUSD chart, we can see that shift in trend that led the current medium-term uptrend that’s gained 2.61% to last Monday’s high. Monday started a shift back to sellers, which have taken back 35 pips. This is the 3rd correction we’ve seen in this trend since it started this month. All corrections look normal and healthy and haven’t made deep inroads.

While the momentum on the mid-term remains bullish we’re looking for the current trend to continue. We have added a Fibonacci retracement so traders can see clearly the normal points a larger pullback could reach while maintaining a normal trend. The key points are the 38.2% (1.1064) and 50% (1.1029) fib points. The 61.8% is also valid but a drop that low at times can hurt overall momentum. Traders could keep an eye out for new lower highs that may point to a deeper move that could reach the two points mentioned. With this in mind its time to watch and wait for a suitable point to reenter.

EURUSD Daily Chart
EURUSD.iDaily-23-10

Good trading from Eightcap.
All times are AEDT.