Dollar drives higher

The dollar is pushing higher as Greece is the focus for continental Europe, while election fever in the UK is subsiding. 

Source: Bloomberg

Euro shaken by Greece
EUR/USD is feeling the pressure of Greece’s repayment to the International Monetary Fund (IMF) which is due tomorrow. Even though the indebted nation repaid €200 million to the IMF for a separate repayment last week, the market has dwindling confidence in the nation’s ability to repay its debts.

The Eurogroup is meeting today in Brussels, and Jeroen Dijsselbloem, who chairs the group, is holding out little hope of a deal being struck. Greece now has until the end of June to reach an agreement with its creditors over reforms that are acceptable to both sides, but the Syriza party is still playing hard-ball with the country’s creditors.

The 200-hour moving average will act as a barrier in the $1.12 region, and the overnight low of $1.1133 will be the initial target. A move through that level will put $1.11 in sight, and the next level of support will be $1.10. If $1.12 is cleared, then the resistance in the $1.1275 region will be brought into play, and then traders will look to $1.13. 

Sterling slides post-election
The pound is giving up the gains it made on the back of the Conservative victory last week, and now that the euphoria of the election is over the continuation of the decline is expected.

A Conservative majority government is seen as the favourable choice by the market, as it means we can expect, broadly, more of the same for the next five years. This should help keep the UK’s economic recovery on track. A Bank of England interest rate decision at 12pm (London time) is unlikely to reveal anything new in terms of monetary policy.

The solid non-farm payrolls figures and unemployment data from the US on Friday has kept the US in the lead over the UK in the interest rate race, and this will give the dollar the upper hand over the pound.

GBP/USD has traded above the 200-day moving average (DMA) three times in the last two weeks, but on each occasion has retreated. The first target to the downside is $1.54, and then the pre-election level of $1.5250/70 will be on the radar. If $1.54 is held, the 200-DMA at $1.5446 will be the first target, and look to $1.55 and $1.5523 respectively.

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