morgan-stanley-logoNorthern Ireland heading towards new elections may complicate matters, leading to speculation that Article 50 may not be triggered in late March which could increase economicuncertainty even more.

Key EMU states have scheduled elections too: Netherlands, France and Germany. According to the deputy PM the Netherlands will block any EU trade deal with the UK,unless it signs up to tough tax avoidance regulations preventing it from becoming an attractive offshore haven for multinationals and the rich,giving the impression of the UK and the rest of EMU drifting apart. Against this background GBPUSD should stay offered trading closer towards our 1.17/15 target. We remain GBPUSD short.

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Trade Idea for this week

AUDUSDDailyAUDUSD has failed to break the 0.7530 technical resistance defined by the high traded on the 14th December and the 200-day MAV offering a good risk reward for short positions. Stops should be placed at 0.7535. China allowing commentators to discuss a one-off RMB devaluation suggests that China either regards these measures as a serious tool to support its over-capacity prone economy to improve or as a threat against potential trade restrictions imposed by the US. Brexit concerns and President elect Trump-related uncertainties should keep risk appetite offered working againsthigh yielding, foreign capital flow dependent currencies. The risk to this view is a continual rise of iron ore prices, Australia’s main export.

We like to sell AUD/USD at market with a target of 0.7200 and stop at 0.7535.

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