Forex: Gbp Follows Equity Momentum Up and Down

After being the bullish solo star of the show on Monday, it was the turn of Gbp to move lower against the Usd on Tuesday, and pull the rest of the major currencies lower in its wake. There was no major reasons behind the moves seen overnight, outside of realignment ahead of the upcoming U.K. elections, and the heavy intraday Gbp/Equity index link that has influenced the price action on Gbp in the near-term recently.

For the first time in a long period, Greece and the Eur played only a secondary role in the market, leaving room for the U.K. election to take the main headlines. This, coupled with poor macro-economic numbers coming out of the U.K. was enough for the Gbp to drop 120 pips. The second weakest major currency throughout the overnight trading hours was the Eur, which fell 90 pips against the Usd, while the others lost on average 50 pips.

Gbp/Usd is near a support trend-line that has been holding the market for about a week. If it breaks beneath this area, the pair could easily test the 1.50-1.5100 region. The Eur/Usd is consolidating in the 1.3300 zone, and is an area that the market has been struggling to break for almost a month. If the current wave of Usd strength pushes the exchange rate below 1.3300, the outlook of the pair turns to heavily short once again, from the current neutral read.

Declines could be seen in the equity and commodity markets overnight, and that initially aided the long side of the Usd. The most notable move came from S/P futures, which broke below the 1210.00 swing point area. Such a break-out will indicate a strong bearish sentiment if it manages to hold lower at the end of the session, because rarely have the futures index moved notably in after-hours trading.

The U.S. calendar has one macroeconomic item, the CB Consumer Confidence report at 10:00 ET. A downbeat read will probably extend the sell-off seen during the overnight equity session. At approximately the same time, the CEO of Goldman Sachs, Lloyd Blankfein, will present his testimony in front of the Senate’s Permanent Subcommittee on Investigations, probably putting pressure on the financial sector, and thus on the S/P index.

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