The pound is showing a 0.3% decline versus both the dollar and euro presently, although up from its intraday lows. A pop higher following a firmer than expected manufacturing PMI headline out of the UK proved to be fleeting. Over the last week the pound is showing an average 1% decline versus its G3 counterparts, therefore is seems that political risk takes over markets again despite the strength presented yesterday especially on GBPCAD pair due to Oil influence. Next Thursday’s general election in the UK, has suddenly become a close call than pretty much any pundit would have believed until last week. One poll has even showed risk for there being a hung parliament. This follows last week’s unexpected downward revision in UK Q1 GDP data to 0.2% q/q, which compares to growth in the U.S. of 0.7% q/q and of 0.5% in the Eurozone. Much attention will be on the UK’s services PMI, due out next Monday, as the key sector (accounting for nearly 80% of the economy) drove GDP growth lower in Q1.
Today, cable ebbed back under 1.2870 after peaking at 1.2890, and therefore it is moving below 20 DMA and the psychological 1.2900 key level. Hence the fact that UK elections are back in focus, and despite the better than expected UK May Manufacturing PMI data released this morning, a Short position was taken with entry at 1.2854. Short position decision was confirmed by the fact that pair is moving southwards without being able to break the 20 DMA, but most importantly by the creation of a hummingbird by Bollinger bands pattern, which indicates a bearish signal in the daily chart. Firstly, an intraday target was set at 1.2800, which is also the confluence of the 200 Day EMA, while a Daily target was also set at 50-DMA at 1.2750. RSI is at 47 sloping downwards, while Parabolic SAR remains negative since May 25. Resistance is at 1.2930, which is this week’s resistance level.
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