Friday May 7, 2010 - 20:05:59 GMT
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Forex Hound - www.forexhound.com
Election Uncertainty Pressuring British Pound
Concerns over a hung parliament following the U.K. election
helped to weaken the GBP USD overnight. Although the Sterling
has bounced off of its low, worries still linger that without majority
leadership in the U.K.,
the ruling party may have difficulties implementing the austere financial
measures necessary to gain control over the budget deficit.
The Euro is trading higher. Oversold conditions are the
primarily driver behind today‚Äôs rally. Pressure has been mounting on the
European Central Bank to step in and attempt to instill confidence in the Euro.
Among the techniques being discussed are restructuring risky loans, offering
zero percent loans and buying troubled debt in Greece,
Portugal and Spain. As we near
the close the real test will be whether hedge funds and large speculators press
the Euro lower ahead of the week-end, or do they cut positions. Either way,
volatility is expected to remain high.
The USD JPY is trading higher after getting crushed on Thursday.
Overnight the Bank of Japan weakened its currency by injecting 2 trillion Yen
into the market. The Dollar/Yen rallied after this move and has been able to
hold on to those gains most of the day. The firmness in this currency pair
suggests that stocks may try to mount a rally later in the day.
The USD CAD is trading lower. On Thursday this pair rallied
sharply higher when panic hit the stock markets. The easing of tensions in the
equity markets is helping to drive the Dollar/CAD lower at the mid-session.
Technically, this market is trading back inside of a retracement zone which may
mean the start of a corrective break. 1.0463 is the new resistance. A break
through 1.0366 will indicate weakness. Based on the short-term range of .9929
to 1.0738, the next downside target is 1.0333 to 1.0238.
This weakness in the equity markets has pressured the AUD
USD all week. Today‚Äôs relatively calm conditions are helping to stabilize the
Aussie. Based on the main range of .9387 to .8708, the market may attempt to
rally back to a retracement zone at .9047 to .9128.
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