Forex snapshot

As US dollar sentiment continues to drive moves against both the euro and the pound, all eyes are on this afternoon’s US quarterly GDP figures.

Pound and dollar
Source: Bloomberg

GBP/USD suffers ten day trading decline

The sequence of negative days for GBP/USD stretches back to 15 July and although this might not have seen more than 200 pips knocked off the price, it has seen ten trading days of decline. On the relative strength index this is now heavily oversold and in the natural ebb and flow of price movements, some sort of correction would appear likely.

Debate among currency traders has been focused on who will rise first, the US or the UK. Certainly the perception a month ago was that the UK were the clear favourites, but with a combination of impressive US corporate figures and UK companies crumbling about currency headwinds, sentiment has begun to change.

The combination of looking oversold and the 100-day moving average should offer GBP/USD some support just above the $1.6920 level.

Eurozone nations stand against Russia

A scarcity of economic data from the eurozone this week has ensured that the focus remains on the US side of the equation. The other issue hanging over Europe has been the uncertainty surrounding the severity of sanctions that should be imposed against Russia. Public and political attentions to sanctions have been focused following the downing of flight MH17 and the increasing likelihood that the weapons used were obtained from Russia.

The speed with which the eurozone nations have come together with a unified stance against Russia is a reflection of the dependence that many nations have with the country. French banks have a sizable loan book to Russian companies and a large proportion of the energy supplies that Germany is reliant on are sourced through Russia. The obvious reluctance in sanctions is the knock on financial consequences that will hit the eurozone nations.

EUR/USD was already looking oversold at the beginning of the week and now that it has broken below $1.34 today, this perception is beginning to be questioned. Certainly a close below the $1.3380 level could see even further falls being triggered. Of course with the important US quarterly GDP figures out today, that is far from a certainty.

This information has been prepared by IG, a trading name of IG Markets 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. See full non-independent research disclaimer and quarterly summary.

CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen. 79% van de retailbeleggers lijdt verlies op de handel in CFD’s met deze aanbieder.
Het is belangrijk dat u goed begrijpt hoe CFD's werken en dat u nagaat of u zich het hoge risico op verlies kunt permitteren.
CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen.