News that UK Polling agency YouGov now predicts that PM May’s conservative party will not win a majority has sent the GBP/USD plummeting below 1.2800 in early Asian trade Wednesday. We have bounced a little since the news but with a short squeeze yesterday the downside is much more vulnerable now. A break below 1.2800 opens up a move back down to 1.2600. Post UK election a majority win opens up move to 1.3300 but an election failure for PM May could encourage sellers once again and 1.2000 is very possible as Brexit negotiations begin.
EUR/USD did hold onto its short squeeze gains though and is back in striking distance of 1.1200 shrugging off Italian election concerns and talk that Greece is playing hardball again to get debt relief. The uptrend in the EUR/USD is built largely around next week’s ECB meeting showing signs the central bank is preparing to taper and if Draghi delay’s again we could see a bigger reversal. If we get Taper talk then 1.15 is the natural target in coming months regardless of whether the FED raises rates or not at the June 14th FOMC meeting.
USD/JPY is struggling and with little news except US bond yields remaining subdued, it is hard to make sense the grind lower. That alone makes it dangerous though and hard to buy unless we get a strong NFP catalyst and clear downside bounce later on Friday. If we etch out a nice support at Y110 then we can start to play USD/JPY as a Y110-Y114 Range.
AUD/USD is caught between AUD and USD weakness and moving in very small ranges the past 2 weeks, 0.7520 is now key resistance but sentiment is weak and selling rallies is preferred. Thursday’s Capax the key data.
