CFDs are a leveraged product and can result in losses that exceed deposits. Trading CFDs may not be suitable for everyone, so please ensure you fully understand the risks and take care to manage your exposure.

Dollar continues to ease back

Both EUR/USD and GBP/USD continue to edge higher, moving closer to overbought territory.

CFDs are a leveraged product and can result in losses that exceed deposits. Trading CFDs may not be suitable for everyone, so please ensure you fully understand the risks and take care to manage your exposure.
Pound coins and dollar
Source: Bloomberg

Bear trend remains in GBP/USD

GBP/USD's rate continues to bump its head against the $1.5000 level that was previously support and is now acting as resistance. The longer-term bear trend in GBP/USD is not under threat, but it will be interesting to see if the sellers come in before the moving averages move closer to the $1.5200 level or at this psychological one.

The last couple of days saw UK inflation collapse down to 0%, and the period of deflation predicted by market observers almost looks inevitable. The fly in the ointment of this theory has been Saudi Arabia’s military intervention in Yemen, as it has felt the need to help the struggling ruling party. This has had the unavoidable effect of squeezing both Brent and US light oil prices higher by over 4%. A sustained period of higher oil prices would help keep inflation here or even see it rise.

The Bank of England has said nothing that would indicate that it is about to intervene; however, with the UK general election starting in earnest there is always the possibility of politicians muddying the waters. The bear trend remains intact and higher levels continue to offer more attractive levels to sell at.

EUR/USD eyes $1.1200

As EUR/USD’s level creeps higher it has edged closer to the 50-day moving average at $1.1200, and also moving into overbought territory on the relative strength index. This still looks like a respite in the bearish sentiment that has dominated EUR/USD rather than a change in the markets thinking. The economic data that has been coming out of the eurozone has not given investors any reason to believe that a recovery is back on track. However the sentiment data from the eurozone does shown that the business sentiment is now more confident undoubtedly due to the start of the European Central Bank beginning its own QE scheme.

This will see equity markets supported and could well see the flow of funds to small and medium sized businesses improve. As is always the case with the eurozone not everyone is happy and the Greeks continue to cause unrest with their aggressive haggling over the severity of austerity in the country and how far they need to go in order to legitimize the continuation of the bailout. A consequence of this uncertainty has been the increase of funds leaving Greek banks and need for the ECB to top up its capital adequacy levels.

These current rises in EUR/USD are offering more attractive levels to sell into and the bearish trend remains in place.

This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication.  Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. 

CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.