UK Poll sinks Sterling; traders go defensive ahead of G7 summit

The pound has come under pressure overnight dropping under $1.2900 against USD. A YouGov poll showing the Conservatives lead over Labour falling to 5 percentage points has rattled traders and broken election complacency.

This news has added to a trend of growing political uncertainty. With a long weekend coming up in the US and the UK, sentiment gas gone more conservative and traders have been moving capital from risk markets to defensive havens. European indices are down solidly today with the Dax down 0.5%. US index futures are down slightly while the falling pound has propped up the FTSE.

Meanwhile gold and JPY are both rallying today with gold blasting through $1,260 and USDJPY falling back under 111.00.

President Trump’s overseas trip continues at the G7 summit. Traders may be concerned about the potential for disagreement over trade (finance ministers couldn’t agree a few weeks back) and climate change (Trump is expected to decide what to do about the Paris accord sometime after the summit). Next week the President returns home to domestic turmoil and potential testimony to Congress from former FBI Director Comey. Yesterday’s comments from President Trump at the NATO summit that allies have underspent by over $100 billion leaving US taxpayers stuck holding the bag the ongoing dustup over the US leaking intelligence shared from other countries and comments from the President slamming Germany on trade that ran in German newspapers indicate there may not be any mood for compromise at this meeting. 

Crude oil has stabilized this morning which could take some of the pressure off of energy stocks while the gold rally could help precious metal miners.

US indices have been trading at or near all-time highs‎ recently despite swirling political risks. Today could be a key test of confidence and willingness to hold positions over a long weekend. For data today, durable goods orders and a GDP update are due.

While this all looks encouraging, the big question over the next 24 hours is whether traders are willing to keep adding on to long positions heading into a long weekend in the US and UK.

The G7 summit being held Friday and Saturday may also have an impact on markets, particularly currencies with traders at the top of the agenda after finance ministers failed to agree on anything. At the NATO summit today, President Trump blasted 23 of the 28 member nations for failing to meet their commitments and mounting controversies over the US leaking intelligence shared from other countries

Chart Signals: Sterling breaks down, gold breaks out

There are a number of significant moves underway in the markets today. GBP has come under pressure breaking down against both USD and EUR. On the other hand, capital moving back into defensive havens has propelled gold to a breakout and sparked a rebound in JPY. Indices look sluggish, losing the wind from their backs but not quite breaking down either, Germany 30 has been leading the retreat such as it is.

North American and European Indices

US 30 failed to break out over 21,130 resistance Thursday and has slipped back toward 21,040. Another lower high in the RSI signals slowing upward momentum. So far 21,000 support has been holding but if it fails, next support may not appear until the 50-day average near 20,800.

US SPX 500 is having an inside day, consolidating Thursday’s breakout over 2,400 but sitting below 2,418. RSI remains in a downtrend and a bearish negative divergence continues to grow. Next measured resistance near 2,425 with next support at the 50-day average near 2,370.

US NDAQ 100 ran into resistance near 5,800 but is holding well above its 5,730 breakout point, trading near 5,775. A negative RSI divergence and non-confirmation suggests that upward momentum may have peaked. 

UK 100 has paused in the 7,450 to 7,540 range with RSI suggesting this could be a consolidation phase within an ongoing uptrend with initial support in place near 7,500. At the same time, however, a double top may be forming.

Germany 30 is still rolling over falling from a lower high near 12,630 toward 12,530 with next potential support near 12,500 then the 50-day average near 12,360. RSI testing 50 where a breakdown would signal a downturn in momentum.

Commodities

Gold is breaking out of a symmetrical triangle today clearing $1,260 to signal the start of a new upleg. The price has advanced on $1,266 with next potential resistance near $1,270 then $1,2890 and $1,284. RSI holding 50 confirms underlying accumulation.

WTI has successfully retested $48.00 support and has stabilized between there and $49.00. It remains in a downswing below its 50 and 200-day averages near $49.30 and with RSI still under 50. Next downside support near $47.15.

FX

US Dollar Index appears to be forming a saucer bottom between 96.65 and 97.35 with support moving up toward 97.00. RSI creeping up from 30 suggests downward pressure easing. Next resistance on an upturn in the 97.80 to 98.00 area.

USDJPY has turned back downward within its 1110.65 to 112.15 trading range falling below its 50-day average near 111.15. RSI still below 50 confirms ongoing distribution. Next potential support near 110.00 where a round number and the 200-day average converge.

EURUSD continues to roll over with resistance falling to $1.1230 from $1.1260 and the pair falling back under $1.1200. RSI rolling down from overbought signals a correction starting with next potential support near $1.1165 then $1.1095. 

EURGBP is breaking out again today, clearing 0.8680 and rallying up toward 0.8720. Rising RSI confirms increasing upward momentum but is approaching overbought territory. Next potential resistance near 0.8735 then 0.8800. 

GBPUSD is breaking down from a rising wedge today, taking out $1.2900. The RSI has confirmed the downturn falling below the 50 line. Initial support appears near $1.2825 followed by the 50-day average near $1.2730.

USDCAD’s latest trading bounce was contained by its 50-day average plus the $1.3500 round number. RSI below 50 confirms its downtrend remains intact and the pair has dropped back toward $1.3465 already. Next potential support near $1.3400 then $1.3310 on trend.  

CADUSD remains in an uptrend of higher lows despite a correction with support at its 50-day average near $0.7400. RSI holding 50 confirms underlying accumulation continues. Initial resistance possible near $0.7470 then $0.7500. 

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