Lukman Otunuga
ForexTime (FXTM)
Sterling bears went on a rampage during trading on Monday following the fresh political rifts within the Conservative Party, which eroded the outlook for a currency already dogged by concerns over the immeasurable impacts of a Brexit to the UK economy. The unexpected resignation of Brexit supporter and Pension Secretary Iain Duncan Smith on Friday may have heightened fears over Prime Ministers David Cameron’s ability to unify his party at such a critical period. Financial heavyweights have wasted no time in voicing their concerns of a Brexit, with the CBI warning of serious shocks to the United Kingdom resulting in as much as 950,000 jobs lost by 2020. With internal political tensions set to intensify as the Brexit vote looms, the Sterling may be left vulnerable and open to further losses with the uncertainty haunting investor attraction towards the currency.
While the Brexit uncertainty continues to leave the pound depressed, domestic data from the UK which has followed a lackluster patternmay have sabotaged any true recovery in value. Market participants may direct their attention towards the UK inflation report today which may provide additional clarity on how the United Kingdom is faring amid the global turmoil. Inflation has edged noticeably higher since the start of the year, and if today follows the same positive pattern then Sterling bulls may be offered a temporary lifeline before the Brexit fears drag prices back down. Investors should keep in mind that these tepid inflation levels are still well below the Bank of England’s 2% target and coupled with the unstable global economic landscape, the central bank remains in no rush to raise UK rates anytime soon.
The GBPUSD experienced a sharp decline yesterday with prices attaining a daily close back below the psychological 1.44 level. This pair is on route to turning heavily bearish on the daily timeframe and a weak inflation report may act as a catalyst for a swift decline back towards 1.42. From a technical standpoint, prices are trading above the daily 20 SMA while the MACD is currently flat. Bears must secure dominance below 1.44 for a potential decline towards 1.42.
Euro searching for direction
The Euro is currently on standby ahead of the anticipated German Ifo Business Climate report which should provide some clarity on the health of the Eurozone economy. For an extended period ongoing concerns about slowing global growth and China woes have exposed the Eurozone to downside risks, while fears that the ECB may have run out of ammunition to boost growth remain elevated. If the German Ifo signals a decline in confidence today then the Euro may sink slightlyas investors pile on bets of further stimulus measures to be implemented by the ECB.
The EURUSD is currently technically bullish on the daily timeframe as prices are above the daily 20 SMA while the MACD trades to the upside. Previous resistance at 1.120 should act as a dynamic support for an incline back towards 1.130 and potentially higher.
Disclaimer:This written/visual material is comprised of personal opinions and ideas. The content should not be construed as containing any type of investment advice and/or a solicitation for any transactions. It does not imply an obligation to purchase investment services, nor does it guarantee or predict future performance. FXTM, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability for any loss arising from any investment based on the same.
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 90% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Recommended Content
Editors’ Picks
EUR/USD regains traction, recovers above 1.0700
EUR/USD regained its traction and turned positive on the day above 1.0700 in the American session. The US Dollar struggles to preserve its strength after the data from the US showed that the economy grew at a softer pace than expected in Q1.
GBP/USD returns to 1.2500 area in volatile session
GBP/USD reversed its direction and recovered to 1.2500 after falling to the 1.2450 area earlier in the day. Although markets remain risk-averse, the US Dollar struggles to find demand following the disappointing GDP data.
Gold holds around $2,330 after dismal US data
Gold fell below $2,320 in the early American session as US yields shot higher after the data showed a significant increase in the US GDP price deflator in Q1. With safe-haven flows dominating the markets, however, XAU/USD reversed its direction and rose above $2,340.
XRP extends its decline, crypto experts comment on Ripple stablecoin and benefits for XRP Ledger
Ripple extends decline to $0.52 on Thursday, wipes out weekly gains. Crypto expert asks Ripple CTO how the stablecoin will benefit the XRP Ledger and native token XRP.
After the US close, it’s the Tokyo CPI
After the US close, it’s the Tokyo CPI, a reliable indicator of the national number and then the BoJ policy announcement. Tokyo CPI ex food and energy in Japan was a rise to 2.90% in March from 2.50%.