March Madness, are Markets on the Verge of Breaking?

On Friday 20,000 was the number which sent shockwaves around markets. This was the NFP number for February, 160k below the forecasted, which sent Gold back towards $1,300. As this week progresses many expect the ripple effect to continue. What rippled in the US is storming in the UK with Tuesday seen as a breakthrough day for what’s to come with Brexit. Tuesday evening sees another parliamentary vote which many hope will be the last.

MPs are set to vote whether they back the PMs deal. If they do, then Brexit looks set to happen by the March 29th deadline, if they do not, then the proverbial Brexit can could be kicked further down the road with no assurances when the UK will leave, and thus causing a stubbed toe for the assailants.

With the pressure growing, the would be assailants have been exposed in the markets with the EUR reaching its lowest point against the GBP since May 2017. The irony as this March could be the last we see of May. Providing she fails to get this across the line, conservatives likely to call for her job should the UK remain in the EU.

So which markets are set to be the most affected, and how should traders prepare for this?

EURGBP

This descending triangle has been the story so far this year in EURGBP as it became clearer Brexit wouldn’t be as easily achieved as initially forecasted. With EUR weakening, many see this uncertainty as crippling focus on growth , with many Eurozone countries finding themselves ever closer to recession. The question this week is depending on the votes in parliament, do we see a breakout from the current floor of 0.85562, or a rally back towards 0.86. Average volatility for the last 2 days stands at 0.0161, 3 times the 30 day average.

Tradeview-EURGBP-03-12-2019

DAX

With the EUR weakening YTD, the DAX has seen gains in the same period creating an ascending triangle, opposite to what we saw above. Essentially with a weaker currency, investors have seen this as an opportune time to invest. The resistance of 11864.00 which hasn’t been broken since October 2018, will this week see this happen? Or will history repeat itself as we saw the last 2 occasions this resistance was tested, with a sell-off ensuing shortly after.

Tradeview-DAX-03-12-2019

Eliman Dambell

 

Eliman Dambell
Bussines Development
edambell@tvmarkets.com