Rupee strength continues, ECB chief Draghi's last monetary policy due today while Brexit developments and concerns dominate

Investors' attention has also shifted to the increasing likelihood of US Fed rate cut in the October 29-30 policy due to slowdown in the manufacturing sector, consumer sentiment and mixed inflation results. Traders see 91 percent chance for 25-basis points rate cut by the Fed. The rupee is expected to broadly trade in the range of 70.55 to 71.05, followed by 70.35 which remains an important support while 71.30 remains an important resistance.

European Central Bank monetary policy (ECB) is due today which is expected to be a non-event but the focus remains on the Manufacturing and Services PMI data of German, French and Eurozone which are also due today.

ECB chief Mario Draghi is ending his eight-year term at the ECB at the end of the month. The ECB will start buying €20 bln of bonds a month starting from the start of November. At the ECB’s September meeting, they had announced the restart of asset purchases, cut its deposit rate to minus 0.5 percent and eased the terms of its program of long-term bank loans.

But the decision also sparked a revolt on the governing council, with some policymakers seeing the resumption of bond purchases as excessive. Given this stance, no change is expected in this policy.

Major resistance for EURUSD comes at 1.1186 levels which is 61.8 percent Fibonacci level of 2017-2018 rally followed by 1.1205 (200DMA) while major support comes at 1.1070 levels. British lawmakers gave a green signal for the Brexit deal which PM Boris Johnson had agreed with the EU last week.

But that was offset later when Parliament rejected his three-day timetable to rush legislation through the House of Commons, making chances for ratification of his deal by October 31 almost zero.

EU leaders considered whether to give Britain a three-month extension while PM Johnson said that if they do so he would call for an election by Christmas. European Council President Donald Tusk said on Twitter he had recommended that EU leaders back a delay. Two scenarios need to be considered:

A. Lengthy Delay: In this case, the chances of a general election go high, which would further add to the uncertainty, affect economic growth and put pressure on Sterling.

B. Short Delay: The chances of closing the deal smoothly remain higher, and Sterling could rally in a knee jerk reaction. But all said and done, even after the deal getting struck and UK moving out of EU, the tough journey for the independent UK would begin from there on. Immediate resistance comes at 1.2990 levels followed by 1.3073 levels (May 08 high) while important support comes at 1.2760 levels.