Cable Braces for Election Result
Financial markets continue to show the high level of volatility on the background of important events. The British pound slightly declined in anticipation of the results of today’s parliamentary elections in the UK. Experts predict that Conservative party of prime minister Theresa May will not be able to get a needed majority that may weaken the UK’s position during the Brexit negotiations with the EU. This scenario may lead to a confident decline of the GBP/USD during the next weeks. In any case, upcoming statements from political leaders following the election result may lead to significant price movements.
Another key event today was the ECB’s meeting and the speech of its president Mario Draghi. A number of experts predicted that during the meeting there would be talks about the possibility of future cuts in the asset purchasing program and normalization of monetary policy, but these questions were not discussed. On the other hand, EUR/USD now is under the pressure because of the fall in the harmonized inflation forecast for 2017 to 1.5%, against previously expected 1.7%.
Draghi’s speech calmed down investors and as a result, we see lower demand for defensive assets like the yen and gold and respectively the growth of USD/JPY and gold price decline. We should also mention the influence of weak data from Japan’s GDP, which has grown by only 0.3% compared to the expected figure of 0.6%.
Oil traders are fixing positions after yesterday’s sharp descending impulse, caused by an unexpected build-up in American crude oil inventories. Tensions in the Middle East region are on traders’ radars but do not have much influence on oil quotes at the moment. The rise of WTI will likely support commodity-dependent currencies like USD/CAD and AUD/USD.
Today the EUR/USD quotes have shown a rise of volatility and as a result, price tested the support line at 1.1200. It's overcoming may become the trigger for continued downward movement with the first targets at 1.1160, 1.1100 and 1.1020. If we see a resumption in growth, the immediate objectives will be at 1.1400, 1.1450 and 1.1500, but the price needs to overcome the resistance line at 1.1280. RSI on the 15-minute chart is far from the oversold zone, which means that the downward impulse is not yet exhausted.
Uncertainty amid the outcome of parliamentary elections in the UK has led to the fall of GDP/USD quotes and we see it approaching the lower boundary of the ascending channel. Fixing beyond its borders and breaking through the closest support at 1.2890 may be a reason for the trend reversal and further decline to 1.2780 and 1.2700. Considering the fact that RSI is in oversold zone, we do not exclude growth resumption. Its potential will be limited by the psychologically important 1.3000 mark and multi-month highs near 1.3050.
The XAU/USD price accelerated the fall after breaking through the support at 1280. Previously the quotes have left the limits of the upward channel and gained a foothold under the 1288 mark. In the case of breaking through the support level at 1270, the closest objectives will be 1260 and 1244. The RSI touched the oversold zone, which usually means the exhaustion of the current negative impulse and possibility of upward price rebound within the rising channel to 1280 or even to 1288.
The USD/WTI price regained previously lost ground and returned to the strong resistance at 46.00. We should also mention that quotes touched the SMA100 that may provoke traders to take profits after the recent upward movement. The closest objectives in case of a fall resumption within the channel will be 45.20 and 44.30. Continuation of growth in the near future will be restrained by the resistance at 46.00 and an upper boundary of the descending channel.
The USD/CAD price rebounded from the lower limit of the rising channel which it returned to yesterday. Support for the Canadian currency has been the growth of oil prices that traditionally have a significant influence on the loonie. In the case of continuation of the current upward impulse, the next targets will become 1.3540 and 1.3600. After the end of the current consolidation near the important 1.3500 mark, we anticipate a sharp price movement. Breaking through the level of local minimum near 1.3480 may become a firm reason for the bears to pull the price down to 1.3420 and 1.3380.