GBP/USD Forecast: Expect wild moves after 10pm local time

The Implied volatility of the GBP pair is on the rise as the markets brace up for the general elections in the UK. Contrary to widespread belief, the GBP remained resilient in the run up to elections, despite the high probability of a hung parliament indicated by the opinion polls. The currency pair is likely to see wild moves once the polls close at 10pm local time. A hung parliament is a widely expected to outcome and could lead to a sharp drop in the GBP/USD pair. The magnitude of the fall in the currency pair depends on the time taken by the newly elected PM to form a coalition government. Investors do believe that whoever wins would quickly form the coalition government. In such a case, the pair would be quick to recover losses. The only GBP supportive outcome would be a convincing win for conservatives, which could se a 200-300 pip up move in the pair.

At the moment, the pair is trading at 1.5237. The technical studies are likely to be overshadowed by the Election event. Hence, investors would do better by simply noting down major support/resistance and Fibonacci levels. A strong resistance is seen at 1.5272 (23.6% Fib of 1.4564-1.5490), followed by 1.5290. The next major hurdle is seen at the 200-DMA located at 1.5458. On the other hand, immediate support is seen at 10-DMA currently located at 1.5240, followed by 1.5136 (38.2% Fib of 1.4564-1.5490), 1.5088 and 1.5027 (50% Fib of 1.4564-1.5490).

EUR/USD Analysis: Rising trend intact above 1.1293

The EUR/USD pair rose above 1.13 on a broad based dollar weakness, upbeat Eurozone PMI figures. There was also news that EU Junker and Greek PM Tsipras discussed over the phone steps to secure an agreement. However, it still unlikely that Greece could reach a deal with its creditors on Monday. The pair could take cues from the German factory orders data due later today. Given the positive momentum, an upbeat factory orders data could push the pair closer to 1.14 levels. Meanwhile, a weak data could push the pair back to 1.13 levels. Stops were triggered on Wednesday after the pair rose above 1.13, which pushed the pair to an intraday high of 1.1368. Consequently, markets would wait for a highly bearish fundamental news or technical closing before initiating fresh shorts.

The pair currently trades at 1.1358 levels, slowly inching towards the previous session’s high at 1.1368. The RSI on the daily as well as on the intraday time frames has hit the overbought territory. On the hourly chart, the pair could form a bearish divergence in case pair rises above 1.1368 followed by a drop. On the 4-hour chart, the bearish RSI divergence is almost confirmed. Consequently, the pair could drop to 1.13 levels after rising to 1.1370-1.1380 levels. On the downside, 1.1293 (23.6% fib of 1.3991-1.0461) could act as a strong support to the pair. A daily close below same could begin in fresh offers, shifting risk in favor of further decline to 1.11 – 1.1060.