Forex snapshot

The pound is under pressure versus the US dollar and traders remain nervous as we enter the final stretch before referendum day.

Pound and dollar currency
Source: Bloomberg

The euro has started the week on the wrong foot while the dollar’s strength continues as Wednesday’s Federal Reserve meeting is in focus.

Sterling down as Scotland’s decides

The pound is trading at $1.6238, down 0.15% as the clock ticks towards the big decision on Thursday 18 September. The ‘No’ vote remains ahead in the polls but the margin is too close to call and the bias reminds on the downside. As Alastair McCaig stated, the pound has moved out of oversold territory but we have yet to see conviction buying. Today is a quiet day in terms of UK economic data and the focus will remain on Scotland.

The pound is yet to close the gap up to $1.6326 and support is coming in at $1.6191. If the referendum keeps moving in the direction of the ‘No’ vote it could target $1.6326, but a late resurgence in the ‘Yes’ campaign could push sterling to $1.6059.

Euro could drop further

The euro is trading at $1.2931, down 0.25% on the morning’s session. As the euro shows no sign of recovering from the interest rate cut by the European Central Bank at the beginning of the month, it continues to be rangebound. As Alastair McCaig stated, traders are still worried they could see a flare up in tensions between Russia and the EU; this has given traders little reason to buy the euro.

The next wave of euro selling could be triggered by the Federal Reserve meeting on Wednesday at 7pm (London time). The US dollar basket has made gains for nine consecutive weeks, and traders are hoping to find out when the Fed will raise rates. Any indication that it could be shortly after QE ends could drive the euro to $1.2883. The euro is encountering resistance at $1.2966.

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