US pulls back again

The dollar has dipped while traders hold their nerve ahead of tomorrow’s UK election.

Dollar and pound
Source: Bloomberg

Sterling claws back losses

GBP/USD is slowly pulling back the losses it encountered at the back end of last week, but any further advances will be held back by the uncertainty of the UK general election. Since voting gets underway tomorrow, any last minute jitters could kick in today. As I stated yesterday, the Conservatives are tipped to win more seats, but Ed Miliband has a marginally higher chance of becoming the next prime minister, and this uncertainty will hang over GBP/USD. The financial markets will be favour of David Cameron being in Downing Street, but the Conservatives will more than likely need a coalition partner or two for that to happen.

GBP/USD has been in an upward trend for just over four weeks, and the 200-day moving average proved a difficult barrier to pass, but its appears sterling is making a second attempt at the metric. The $1.52 level is acting as support and if it is held the resistance at $1.53 will be the initial target. A move through it will make $1.54 the next level to watch. The 200-DMA has been pierced twice but it failed to hold above the metric. A drop below $1.52 will bring the support in the $1.5160/70 region into play, and below that $1.1515 will the next support level. 

Euro on the rise again

Eurozone growth forecasts are on the rise and so is EUR/USD, after the European Union upped its growth forecast from 0.2% for the year from 1.5%, but the outlook for Greece is gloomy as its growth forecast was cut from 2.5% to 0.5%. The gap between Greece and the rest of the eurozone has never been wider, and Greece is no longer lumped in with the so-called PIIGS (Portugal, Ireland, Italy, Greece, and Spain). Greece was the first casualty of the eurozone debt crisis, and it is still suffering. Athens must make the first of a series of repayments next week, and the pressure is still on to avoid bankruptcy.

On a daily chart EUR/USD is overbought, and a pullback is plausible, with $1.12 as the initial target. If that mark is punctured $1.11 will be in sight. However, if $1.12 is held the resistance in the $1.1280 region will be the initial target and the $1.13 will be on the radar. 

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