British Pound Adrift Amidst Election Jitters
Today’s Spotlight Market
The next general election for Great Britain will occur on Thursday, May 7th.? The outcome of the election is very tough to predict; as of now, the likely outcome is a hung parliament. In this case, the smaller parties — Liberal Democrats, Scottish National Party, and UK Independent Party — could determine which of the major parties forms the next government. The British Pound has seen volatile trading over the past few months in anticipation of the upcoming election.
Fundamentals
Aside from the election, two recent economic reports have put pressure on the Pound. First, UK GDP growth came in at 0.3%. This was far below the 0.6% rate in the fourth quarter of 2014. Secondly, the UK Manufacturing Purchasing Managers? Index fell to 51.9 in April, from 54 in March. These two economic reports have may have been a contributing factor to the Pound pulling back sharply after a mid-April run-up. The double-whammy of political and economic uncertainty may indicate more volatile trading sessions until a new UK government is formed.
Technical Notes – View Today’s Chart
Turning to the six-month continuation chart, we see a range bound British pound from March until May. Swing traders may have been able to take advantage of the bearish market in March and the bullish market in April, as both trends were fairly steady trends. Support is seen around 1.4625, while resistance is around 1.5350. Right now, the chart shows the Pound trading above the 20-day moving average, but bullish traders should be wary if prices close below this moving average, which could be construed as a bearish signal. The 14-day RSI has moved down from overbought territory to a reasonably bullish 69.04.
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