The British pound fell apart during the session on Friday as we got word of the British parliamentary election results. The conservative party losing a few seats certainly did nothing to instill confidence in the British economy and the British government, and this is especially damning when it comes to the European Union and believing it. Any time you get uncertainty in the markets, that will work against a specific asset. In this case, it is expressed in the currency markets. However, I do believe that there is some hope as I record this as we are hanging about a very important support level on my longer-term charts. The fact that we are starting to bounce around the 1.2750 level suggests to me that perhaps support may hold before it’s all said and done.
It looks as if Teresa May is going to form some type of coalition government with the relatively conservative Northern Ireland branch. This being the case, I think that we may get some stability, and if we can break above the 1.28 handle, the market should go much higher. In fact, we may get a complete return to the massive selloff as markets come to grips with the fact that even though the conservatives did not get some type of super majority, and the and not much may have changed. With this, value hunters are certainly willing to come in as well, and this being the case I think that we could eventually see the buyers return. Alternately, if we were to break down below the 1.2650 level, that would be very negative. However, until that happens I prefer going long as opposed to short which is something that I wouldn’t have said just 12 hours ago.
Written by FX Empire