US Dollar Strength Persists As Euro, Sterling Beset By Headline Risk

GBP/USD DIVES BELOW 1.3000 AS MESSY WEEK AHEAD FOR PM MAY

Brexit dynamics continues to push volatility in the British Pound, and as we open what appears to be a challenging weak for Prime Minister, Theresa May, GBP/USD is testing below the key psychological level of 1.3000. As was discussed by my colleague Nick Cawley a little earlier this morning, PM May could be headed towards a no-confidence vote, as her Chequers plan continues to divide parliament without providing much promise for a compromised solution.

This sets up British Pound price action to be in a fairly volatile position for this week, as this volatility can work in both directions and this isn’t the first time that markets have seen the threat of a no-confidence vote surround PM Theresa May. Something similar happened a month ago when Ms. May’s plan was initially rejected, creating a 375 pip sell-off in GBP/USD. Prices recovered in the aftermath, but now that fears around Hard Brexit or No-Deal Brexit are being coupled with the potential for volatility at the top ranks for the UK government, sellers have come back with force.

GBP/USD FOUR-HOUR PRICE CHART: BEARISH TEST BELOW 1.3000 SUPPORT

Chart prepared by James Stanley

EUR/USD TESTING 1.1500 AS BIG SUPPORT ZONE REMAINS

This was a focus market in the Thursday webinar, as EUR/USD was setting up a potential bear trap. While the backdrop at the time appeared primed for bearish continuation, prices were finding a bit of support around a stubborn zone that had continued to elicit buyers into the market. And sure enough, after a false breakout around Friday’s European open, prices solidified and continued to push higher into last week’s close. But, as another fresh week has opened, bears have gotten back to work, and prices are now re-testing the 1.1500 level on the chart. The big question is whether sellers will find the ammunition to push the pair lower, and that will likely be determined by continued discussions between Brussels and Rome.