The US Desk Round Table is a bi-monthly webinar series in which DailyFX analysts discuss the top themes impacting FX markets, and how upcoming events and data might sway those trends.
This week, Market Analyst Paul Robinson, Senior Currency Strategist Christopher Vecchio, and Trading Instructor Tyler Yell, CMT gathered to discuss the announcement of snap elections in the UK and how it might impact Brexit and the British Pound, how traders should approach the Euro with French elections this Sunday, and what might happen to the US Dollar as markets continue to discount fiscal stimulus and a faster Fed rate hike cycle.
Chart 1 :Â GBP/USDÂ Daily Timeframe (June 2016 to April 2017)
Today, we took a look at a chart of GBP/USD, and with the rally last week on election news it broke the neckline of a big picture bottoming pattern (inverse head-and-shoulders). Cable still has its work cut out for it, but it’s holding well at resistance which comes in the form of lows back in July and August.
The fact the Tuesday rip has held so well against such a big level suggests it will make an attempt to push on through. With that in mind, looking to the left, there isn’t another area of major resistance until the 13400/500 vicinity. A break back below 12500, negating the Tuesday surge and neckline, would be required to turn this view neutral. –PR
See how the retail crowd is positioned in GBP/USD on the IG Client Sentiment page.
Chart 2:Â EUR/USDÂ Daily Timeframe (February 2016 to April 2017)
Market participants have priced in a significant move around Sunday’s results, with one-month implied volatility for EUR/USD having increased from 7.25% to 12.63% over the past six weeks, and it now sits at its highest level since the Brexit vote in June 2016. Likewise, EUR/USD one-week implied volatility is at 19%, eclipsing the highs ahead of the US presidential election in November and back at its highest level since the Brexit vote. This means EUR/USD could trade as low as 1.0400 or as high as 1.1000 depending upon the outcome of Sunday’s vote.
