Trading plan for 18/01/2019:
There was a rather calm session in Asia, although the risk might increase after some publication of reports of possible abolition of import duties imposed by the US on China.
At the currency market, the USD / JPY jumped to 109.40, AUD and NZD rebounded from some of the weaknesses from previous days. AUD / USD returned under 0.72, NZD / USD is at 0.6770.
On the stock market, we have increases based on the wave of improvement in sentiment. Chinese Shanghai Composite gains 1.5% and Japanese Nikkei grows by 1.3%Crude oil found support in improving sentiment and WTI raised to 56.7 USD and is the highest since 11 January. There is nothing new about the gold - still around the level of 1292 USD.The data from Japan passed without reaction. In December CPI, as expected, amounted to 0.3% y/y, but core inflation fell to 0.7% from 0.9%, although it was expected to be released at 0.8%.
On Friday, the 18th of January, the event calendar is rich in important data releases like Retail Sales With Auto Fuel from the UK, Consumer Price Index data from Canada, Industrial Production and Capacity Utilization form the US. Moreover, there is a speech from FOMC member John Williams later on the day.
GBP/USD analysis for 18/01/2019:
At the beginning British Prime, Minister Theresa May was to present a further plan of action next Monday after parliament rejected the draft agreement previously agreed with the EU on Tuesday. Now Andrea Leadsom from the Conservative Party has revealed that the vote in the House of Commons on the new action plan will take place on Tuesday, 29 January. A government will propose a vote, but one can also submit amendments.In the meantime, Prime Minister May conduct cross-party talks that began yesterday evening. Labor Party leader Jeremy Corbyn is the only representative of the party who refused to participate in the talks. At the same time, he rejects calls for a referendum to be repeated. However, the Tories turned to high-level Labor party members to break Corbyn's resistance for the sake of a plan of agreement with the EU.
According to reports, the option of a customs union with the EU is gaining popularity among British politicians. Especially if nothing changes about the backstop, i.e. the emergency plan of temporary arrangements for the future border between Northern Ireland and Ireland, if no agreement could be reached by the end of the transitional period. The customs union is a solution that, however, needs cross-party support because it somehow contradicts the idea of Brexit. On the other hand, EU negotiator Michel Barnier said, that if the UK relaxed its conditions, the EU is ready to move immediately on its side.
Let's now take a look at the GBP/USD technical picture at the H4 time frame. According to the Fibonacci projections, the next target for bulls is seen at 61.8% Fibonacci Extension of the last corrective swing down has been hit already. Moreover, the price has made a new local high at the level of 1.3000, just below the long-term trend line resistance around the level of 1.1315. The market conditions remain overbought and despite the fact, that the momentum is still strong and positive, there is a clear bearish divergence forming between the price and the momentum oscillator. This is why the move up might not be that strong as it seems and the corrective pull-back might occur any-time soon. The targets for the corrective pull-back are seen at the levels of 1.2928 and in the case of a deeper pull-back - at 1.2832. The short-term trend still remains bullish.
