In a rather uneventful day, the surprise announcement by the British Prime Minister Theresa May calling for snap elections in June took the markets by surprise. After initially sliding by 93 pips, the British pound pared losses to close the day 2.2% higher against the U.S. dollar. The rally in the British pound came about as the markets now expect to see a smoother transition with the EU – UK Brexit talks, although it is still speculative for now.
Various opinion polls suggest that Theresa May’s Conservative party is in the lead with over 44% support, compared to the Labor party’s 23% support. The snap elections, if resulting in May’s favor could see the Prime Minister consolidate and strengthen her position at least domestically.
Looking ahead, the markets will be looking to the Eurozone’s final inflation figures which are expected to confirm that inflation increased at a slower pace since rising to 2% in February. Later in the evening, the quarterly inflation figures from New Zealand will be released.
EUR/USD intra-day analysis
EUR/USD (1.0719) is currently moving counter trend after prices fell to 1.0600 last week. After consolidating near this level, EUR/USD posted two days of strong gains as price action was seen clearing the 1.0700 resistance level yesterday.
Any pullbacks will likely see 1.0700 being tested in the near term, ahead of what could be a strong rally towards 1.0800 where resistance is most likely to be tested in the near term. Following the rally to 1.0800, we expect EUR/USD to remain range bound within 1.0800 and 1.0600 into this weekend’s French elections.
GBP/USD intra-day analysis
GBP/USD (1.2825) has posted strong gains after prices were stuck near the 1.2400 support level The rally yesterday sent GBP/USD to breach past 1.2600 and 1.2800 levels, marking a 6-month high in prices. On the 4-hour chart, the gains came following an upside breakout from the descending triangle pattern where support was formed at 1.2400.
Any pullbacks could be seen touching down to 1.2600, which marks the resistance level that was previously held. Establishing support here could pave the way for GBP/USD to test 1.3000 in the near term.
USD/JPY intra-day analysis
USD/JPY (108.56) could be looking to post a relief rally with the prices currently seeing making a modestly higher low. However, the price will have to clear out the previous lower high formed at 109.20. A break out above 109.20 will confirm a move towards 110.00 at the very least which will mark a retest of the broken support level when resistance will also be established.
Alternately, failure to clear 109.20 could signal further downside on a breakdown from the previous lows post at 108.30.