UK Election Day

The UK’s general election is set to occur later on today. Currently, the majority of polls have Labour in the lead with a comfortable margin from their opponents. In particular, a recent poll by YouGov shows Labour on course for a historic election victory with the Conservatives and Liberal Democrats battling for third place. Therefore, our attention now turns to the parliamentary composition, where the outcome could potentially influence the pound’s direction. In the US the ADP non-farm-payrolls figure for June came in lower than expected and in particular at 150k versus the expected figure of 163k. The lower-than-expected figure may imply that the US labour market is loosening, as such it may increase pressure on the Fed to cut interest rates sooner rather than later, which in turn may weigh on the dollar. Moreover, the ISM non-manufacturing PMI figure for June came in lower than expected, and re-entered contraction territory. The lower-than-expected figure, may cast doubt on the resilience of the non-manufacturing sector of the US economy, which in turn appears to have weighed on the dollar following its release. The FOMC’s June meeting minutes were released yesterday. In the meeting minutes, there appears to be some concern that the early part of this year has “seen a lack of further progress towards the Committee’s 2% objective”, when referring to inflationary pressures in the US economy. In our view the highlight of the minutes was the discussion for the possibility of raising the target range for the federal funds rate, should inflation persist or remain elevated. Such scenario could potentially provide support for the greenback.

EUR/USD appears to be moving in an upwards fashion. We maintain a bullish outlook for the pair and supporting our case is the RSI indicator below our chart which currently registers a figure near 70, implying a bullish market sentiment, in addition to the upwards-moving trendline which was incepted on the 26^th of June. For our bullish outlook to continue, we would require a clear break above the 1.0815 (R1) resistance level, with the next possible target for the bulls being the 1.0855 (R2) resistance level. On the flip side for a sideways bias we would require the pair to remain confined within the sideways moving channel defined by the 1.0768 (S1) support level and the 1.0815 (R1) resistance line. Lastly, for a bearish outlook, we would require a clear break below the 1.0768 (S1) support level with the next possible target for the bears being the 1.0720 (S2) support level.

GBP/USD appears to be moving in an upwards fashion. We maintain a bullish outlook for the pair and supporting our case is the RSI indicator below our chart which currently registers 70, implying a bullish market sentiment. Further aiding our bullish outlook, is the upwards-moving trendline which was incepted on the 2^nd of July. For our bullish outlook to continue, we would require a clear break above the 1.2775 (R1) resistance line, with the next possible target for the bulls being the 1.2855 (R2) resistance level. On the flip side for a sideways bias, we would require the pair to remain confined within the 1.2700 (S1) support level and the 1.2775 (R1) resistance line. Lastly, for a bearish outlook, we would require a clear break below the 1.2700 (S1) support level, with the next possible target for the bears being the 1.2615 (S2) support line.

Other highlights for the day:

Today we get Germany’s industrial orders growth rate for May, Switzerland’s CPI rates for June, as well as UK’s and Eurozone’s construction PMI figures also for June. On the monetary front, we note that ECB’s McCaul and Cipollone are scheduled to speak, while the ECB is to release the account of the last monetary policy meeting. Also, note that the UK is to hold a general election. Furthermore, today is a US public holiday, hence thin trading conditions may apply in the markets. During tomorrow’s Asian session, we note the release of Japan’s All Household Spending for May.    

EUR/USD Daily Chart

• Support: 1.0740 (S1), 1.0615 (S2), 1.0450 (S3)
• Resistance: 1.0890 (R1), 1.1010 (R2), 1.1140 (R3)

GBP/USD Daily Chart

• Support: 1.2600 (S1), 1.2480 (S2), 1.2375 (S3)
• Resistance: 1.2760 (R1), 1.2890 (R2), 1.3000 (R3)

If you have any general queries or comments relating to this article please send an email directly to our Research team at research_team@ironfx.com

Disclaimer:
This information is not considered as investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced, or hyperlinked, in this communication.

Share: