Britain's Prime Minister Boris Johnson is facing a new rebellion from his cabinet over concerns of a no-deal Brexit, The Times newspaper reported on Wednesday.

A group of five cabinet ministers – Culture Secretary Nicky Morgan, British Minister for Northern Ireland Julian Smith, Justice Secretary Robert Buckland, Health Minister Matt Hancock, and Attorney General Geoffrey Cox – are on a "resignation watch list."

Further, "very large number" of Conservative members of parliament will quit if it comes to a no-deal Brexit, an unnamed cabinet minister cited by the newspaper said.

  • NZD/USD's corrective rally has stalled at the 21-day MA hurdle since Oct. 4.
  • The 4-hour chart shows an inverse head-and-shoulders pattern.
  • A break above 0.6337 would confirm an inverse head-and-shoulders breakout.

The NZD/USD pair is currently chipping away at the 21-day moving average (MA) resistance at 0.6311.

The MA hurdle first came into play on Oct. 4 and has proved a tough nut to crack ever since. The pair has failed twice in the last three days to close above the 21-day MA.

Hence, it is a level to beat for the bulls. A daily close above the 21-day MA would imply a continuation of the rally from recent lows near 0.62 and expose the next resistance at 0.6451 (Sept. 9 high).

Also, as per the 4-hour chart, the pair has created an inverse head-and-shoulders pattern with the neckline resistance at 0.6337. Acceptance above that level would confirm bullish reversal and create room for a rally to 0.6470.

Daily chart

4-hour chart

Trend: Bullish above 0.6337

Technical levels

  • USD/CNH bounced off 7.12 in the London morning to 7.1645.
  • Global Times reported that the Chinese delegation would be cutting their trip short by a day.

The markets are somewhat quiet considering the leg work was done in the European and US session following numerous trade headlines and key data, Us events which were soaked up by the time Asia come online.

Trade talks sentiment turn sour

The main takeaway, as far as the Yuan goes, came in the negative press over this week's trade talks between the US and China that are scheduled for the end of the week. Moreover, The Global Times reported that the Chinese delegation would be cutting their trip short by a day, which just goes to show the lack of a sense of urgency nor commitments between the two nations have residing over their trade disputes.

"The US State Department announced, ”Visa restrictions on Chinese government and Communist Party officials who are believed to be responsible for, or complicit in, the detention or abuse of Uighurs, Kazakhs, or other members of Muslim minority groups in Xinjiang, China.” USD/CNH bounced off 7.12 in the London morning to 7.1645 after the visa news, the yuan’s -0.4% fall the weakest in Asia," analysts at Westpac explained.

USD/CNH levels:

  • GBP/USD is looking south, having confirmed a bear flag breakdown on Tuesday.
  • The pair has also found acceptance below key average support.

GBP/USD is currently sidelined at 1.2218, having dropped 0.59% on Tuesday.

The pair has found acceptance below the 50-day moving average (MA) for the first time since Sept. 8. The MA is currently located at 1.2253.

More importantly, Tuesday's drop confirmed a bear flag breakdown on the 4-hour chart. The breakdown indicates the sell-off from recent highs above 1.25 has resumed and the pair could fall to 1.21 (target as per the measured move method).

Supporting the bearish case are the descending 5- and 10-day moving averages (MAs) and the below 50-reading on the relative strength index.

4-hour chart

Trend: Bearish

Technical levels

  • The cross is stuck between central banks looking to ease and geopolitical risks.
  • There has been a lack of catalysts for both the Yen and AUD.

AUD/JPY is currently trading at around 72 the figure within a narrow range in the consolidation of the slide from the September highs on the 74 handle as markets remain in risk-off mode.
US and Sino trade wars are here to stay by the sounds of things and markets are soaking up the negative prospects for the long haul.

This week was an unlikely platform for trade talks to gather momentum on the sticking points which the US and China are at loggerheads over and considering the recent antagonistic moves from both sides, markets are positioning for a poor outcome from the negotiations, which incidentally the Chinese are said to be cutting a day short.

Elsewhere, there have been a lack of catalysts for both the Yen and AUD. In recent trade, the Aussie did drop a few pips on the consumer sentiment data, but markets are trending sideways, waiting for bigger things.

US drivers

Overnight Federal Reserve Powell glossed over the US economic backdrop with some bullish commentary which lifted the US Dollar somewhat but the US Producer Price index (PPI) was a pretty dismal prelude to tonight's key US consumer Confidence Index data – PPI fell 0.3% m/m in September on both a headline and core basis, the biggest drop since February 2015.

Meanwhile, the cross is stuck between central banks looking to ease, (US Fed Chair, Jerome Powell, has announced that the Fed would recommence outright Treasury asset purchases to try to calm the repo market), and various geopolitical risks such as Brexit, souring relations in the Middle East and between the US and trade counterparties, such as China and Europe.

AUD/JPY levels

  • USD/JPY is sidelined around 107.05 in Asia amid escalating US-China trade tensions.
  • The US equities fell on Wednesday, pushing the JPY higher as the US blacklisted Chinese companies.
  • The pair may pick up a bid, as treasury yields are recovering the lost ground.

The USD/JPY pair is lacking a clear directional bias amid escalating trade tensions and risk aversion in the equity markets.

The USD/JPY pair is currently trading just above 107.00, representing marginal losses on the day, having faced rejection at 107.30 in the overnight trade.

The US stocks fell on Tuesday as tensions between the US and China escalated ahead of the critical trade talk scheduled to happen at the end of the week. The US threatened to blacklist the Chinese companies over human rights violations in Uighur province.

China urged Washington to withdraw its decision and threatened retaliation. The US, however, said that the plan to blacklist the Chinese companies was unrelated to trade talks. As a result, the S&P 500 index fell 1.56%, sending the traditional safe-haven assets higher.

As of now, the futures on the S&P 500 are reporting 0.21% gains. That could weaken the bullish pressures around the Yen, allowing a minor bounce in the USD/JPY pair.

Further, the yield on the US 10-year treasury note is showing signs of life. At press time, the yield is trading at 1.54%, representing a four basis point gain on the low of 1.50%. Therefore, the American Dollar may find some love.

However, gains, if any, will likely be reversed if China retaliates, leading to another round of sell-off in the stocks and treasuries.

Technical levels