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Trading Outlook in Aftermath of UK Election

Trading Outlook in Aftermath of UK Election

2017-06-09 11:44:00
Paul Robinson, Strategist
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In this webinar, we focused on the price action following the UK General Election. The outcome of a hung parliament resulted in a sizable move lower in sterling, but it wasn’t as big as many had anticipated it could be. GBPUSD dropped below support in the 12700s, and if it can’t climb back above then focus shifts to the downside. However, if it were to rise for the remainder of today’s sessions and wipe a large share of the losses it would be very telling about where cable might be headed.

We looked at several GBP crosses, all of which broke key support levels. Most of which are trading between levels of new support below and resistance (old support). It will take a little time for things to settle down, but we will be looking on with a watchful eye as to how the market treats identified levels in the days ahead. The crosses we looked at included GBPJPY, GBPAUD, GBPNZD, GBPCAD, and EURGBP.

In the EUR realm, we looked at EURAUD and EURNZD primarily. EURAUD broke support we were looking at on Wednesday and tagged it as resistance the same day. Looking for lower prices. EURNZD is treading near support, so we’ll look for signs of buyers, but if they fail to show then support will likely get broken and it will trade lower with EURAUD.

USDMXN is treading water right at the spike-low created following Trump’s surprise victory, but showing little life; this suggests it will break given the lack of buying coming in at a key level. USDZAR is trying to turn lower from a key upper parallel and stay within a bearish channel. Bias is for lower prices to come.

Gold is retesting the 2011 trend-line we’ve been discussing on a daily basis, but could be putting in a nasty weekly reversal bar on a failure to maintain above. A drop below 1260 would confirm the reversal and fake-out breakout above the all-important long-term trend-line. A hold and turn higher will bring 1295 back into focus. A break above the April high would confirm the 2011 trend-line break and we would likely see a big move higher. Silver is trying to hold an intermediate channel to continue its move higher. But overall, we are paying closer attention to price action in gold.

Global indices are somewhat of a mess, and haven’t been the best markets to trade. We continue to be patient in certain developments. US markets are consolidating near highs and poised for further gains. The DAX is in limbo, trading around the 12700 level. The CAC is putting in a nice symmetrical triangle, which appears likely to break in the direction of the trend, but a confirmed breakout is needed first. If it breaks out of the pattern to the downside, then a gap-fill from the French elections becomes the threat. The FTSE 100 is showing good strength today despite many believing it would get hammered on a hung parliament outcome. We must keep in mind; a weak sterling is good for this largely global index. The domination of the index by multi-national companies whose profits are earned outside of the UK provides a boost to earnings when profits are repatriated.

For full technical considerations, please see the video above…

See our quarterly forecasts for FX, equity indices, and commodities to see where our team of analysts see markets heading for the remainder of Q2.

---Written by Paul Robinson, Market Analyst

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