Forex snapshot

EUR/USD continues to drift lower with one eye on last week’s intraday low, while the last 48 hours has seen GBP/USD garner support from the 100-day moving average. 

Mark Carney
Source: Bloomberg

Currency traders will be analysing George Osborne’s speech at tonight’s Mansion house dinner hosted by Mark Carney. It is widely expected that he will use this opportunity to present his plans for introducing tougher penalties for misconduct in the currency markets. It is too early to tell but as the possibility of jail time is not currently a threat in other currency hot spots, there is a fear that London might lose some of its 40% share of the daily multi-trillion currency business.

Euro continues to fall

The last week has seen EUR/USD finally make its way down to the lows of last Thursday’s European Central Bank statement when Mario Draghi outlined his all-encompassing strategy to tackle the euro strength, the eurozone inflation level and encourage economic growth in the region.

The levels that traders will be paying particular attention to will be last week’s lows of $1.3505 and this year’s lows of $1.3477. A close below the latter of the two levels could see the euro ultimately target last November’s low of $1.3295.

100-DMA offers Sterling support

The US dollar’s strength was short lived, as for the third time in the last two weeks the 100-day moving average offered support to the GBP/USD rate. The last three months have seen a predominantly lateral movement in the pound, with the overall bullish momentum still being maintained. It had been hoped that the five-year highs, back in August 2009, would come under threat but this physiological barrier has proven too difficult to breach at the first time of asking.

On the pounds first effort at trading above $1.700 the relative strength index was pointing towards the rate being overbought, but the last couple of months have seen this now fall back down into the mid-range.

The economic picture coming out of the UK in comparison to the US is still weighted to this side of the Atlantic, and a fresh challenge should materialise. As long as GBP/USD can keep closing above the 100-DMA we would maintain our long stance.

The information 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 Bank S.A. 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 and as such is considered to be a marketing communication.