Pound targets 1.33 on Brexit Optimism

Asian stocks markets finished slightly higher after the testimony from Federal Reserve Chairman Jerome Powell during the US trading session. In Hong Kong the Hang Seng ended flat at 28,759 while the Shanghai Composite index added 0.42 percent to 2,953, the Nikkei 225 in Tokyo rose 0.50 percent to 21,556, while Australian equities have recovered some of yesterday’s losses with the ASX 200 adding 22 points or 0.36 percent to 6150. The financial and energy sectors provided support to the broader Aussie market while consumer staples saw the largest percentage gain.

In Wall Street, the S&P index fell -2.3 points or -0.08% at 2793.81. The high reached 2803.12. The low reached 2789.47, and the Nasdaq fell -5.16 points or -0.07% at 7549.29. The high reached 2803.00 in the last hours before falling back down. The low today reached 7524.30 and Dow fell -33.70 points or -0.13% at 26058.11. The high reached 26155.29. The low reached 25966.01. In commodities markets, the crude oil gains 52 cents to $56.02/barrel while Brent oil adds 34 cents to $65.70/barrel. Gold is trading a dollar higher at $1326.73 per ounce as the Greenback losing steam against majors with US Dollar index trading 0.06 percent lower to 95.98.

On the Lookout: The European Central Bank (ECB) Governing Council member Ewald Nowotny noted that the Italian debt is a threat to the European Union. The European Commission Vice President Valdis Dombrovskis crossed the wires in the last hour and said that the Euro-area economy is experiencing a slowdown, but still growing. In Italy, the Consumer Confidence came below forecasts (113) in February: Actual (112.4) while country’s Trade Balance non-EU dipped from the previous €4.28B to €-0.58B in January

In the macro calendar, the US session has plenty of risk events, including the US goods trade balance and durable goods data slated for release at 13:30GMT alongside the Canadian CPI figures. Also, in focus remains the US pending home sales and factory orders data due at 15:00GMT, around the same time the round 2 of the Fed Chair Powell’s testimony is scheduled before the House Financial Services Committee.

Trading Perspective: The Aussie dollar is trading higher to 0.7180 on US Dollar weakness following US Fed chair comments which continue for a second session later today, while Kiwi is trading 30 pips lower at 0.6875 after rejection at the 0.69 area.

GBPUSD Daily Chart

GBPUSD made an impressive rally yesterday enhancing the short term bullish momentum and attracting more bids as traders increased odds of a delayed Brexit after the UK PM Theresa May offered her MPs an opportunity to vote for a no-deal Brexit and Brexit extension in case her initial proposal gets rejected on March 12th. A negative sign for the pair is that it has reached an overbought level and some profit taking can’t be ruled out.

In Pound futures markets the open interest rose by more than 8k contracts on Tuesday vs. Monday’s final 194,160 contracts. Volume followed suit and rose for the second day in a row, this time by around 107.7K contracts. It is worth noting that volume printed the largest YTD build, just surpassing 205K contracts.

EURUSD went through the important 100 day MA that we mention in our daily forex report yesterday like it wasn’t there and that is leading to stops and traders squeezing the pair higher above 1.14 for a couple of hours. In case the pair manages to surpass this area on a convincing fashion, the next hurdle emerges at 1.1442. On the downside, the pair will find support at the 50-hour moving average at 1.1367, while further protection stands at 1.1352 the 100-hour moving average.

In Euro futures markets, traders added around 1.9K contracts to their open interest positions on Tuesday from Monday’s final 527,345 contracts. In the same line, volume rose sharply by nearly 70K contracts.

USDCAD moved to a session low of 1.3143 where met support from the 200-day MA and swing levels from last week. On Wednesday, the low reached 1.3148. On Friday, that level was broken and retested before moving lower yesterday.  On the upside, major resistance stands at the 100-day moving average around the 1.3243 region.

USDCAD Daily Chart

USDJPY remains on the defensive after hitting fresh 2019 tops beyond 111.00 on Monday but failed to hold above the critical 111 mark, currently, the pair touches the 15-day lows and the low of the recent trading range at 110.35. Short term sentiment turned negative, and an attempt to the 50-day moving average around 110 looks the most possible scenario.

Open interest in JPY futures markets dropped by more than 1K contracts on Tuesday from 187,401 contracts seen at the beginning of the week, according to flash data from CME Group. On the other hand, volume rose for another session, this time by around 13.1K contracts.