The pound stays underpinned ahead of the UK election this week
Early bids have helped push the pound to a high of 1.3181, closing in on the May high of 1.3185 as we get into what will be a crucial week for the pound.
It is all about the election now and so far the polls are still suggestive of Boris Johnson coming out on top with traders holding out some hope for a majority outcome as well.
As for cable, looking at the weekly chart:
We can see that buyers are looking poised for a key upside break after closing last week above the 100 and 200-week moving averages. This week, the 50.0 retracement level @ 1.3168 will be a key level to watch out for but it all depends on the election outcome.
If we do see yet another hung parliament result, expect the pound to undo its good work since October as we go back to the drawing board in this whole Brexit debacle.
The DXY is the standard dollar index but it’s weightings are flawed, which is why I prefer the Bloomberg Dollar Index and its trade-weighted nature.
It highlights how the US dollar has climbed from a three-month low at the start of the month to a seven-week high in a steady rally.
It’s up once again today despite the US holiday as the antipodeans and pound slide.
I don’t like to do technical analysis on an index but there isn’t much standing in the way of a further rally.
The kicker for me right now is that yields haven’t offered much support. US 10s are at 1.76% and that’s down from nearly 2% three weeks ago. The market continues to price in a 50% chance of a Fed cut by next July and I think as that comes out, there’s more upside for the dollar — especially against the funding currencies (JPY, CHF, EUR).
The dollar is keeping a little more firm in the European morning so far
And that is helping to see EUR/USD linger near the 1.1000 handle with the low today reaching 1.1003. Sellers remain in near-term control of the pair but trading may be a bit more tepid for now as we look towards a barrage of data to come from the US later.
That will be the key risk event for the dollar and also for EUR/USD in trading today.
But let’s take a look at what are the key levels that buyers and sellers may look to lean on should we see price action move around later on.
The 1.1000 level in itself is already a key one to watch but add in large expiries rolling off today around 1.0995-00, it only makes the figure level more of a magnet for now.
Below that, the 14 November low @ 1.0989 will be a notable one to watch as well. A fall below that will accelerate momentum to the downside for sellers.
Meanwhile, for buyers, any move higher needs to work towards breaking the 100-hour MA (red line) @ 1.1032 first before challenging the 200-hour MA (blue line) @ 1.1049.
A break above those two levels will see buyers reclaim near-term control before potentially moving towards a test of the 100-day moving average @ 1.1080 with further swing region resistance seen around 1.1090-00 next.
Those will be the key technical levels to watch out for now but how price action will play around these levels will depend on how the slate of data from the US plays out later today.