Calmer Markets After the Weekend but Uncertainty Remains High

The US dollar is slightly down today alongside Gold as safe havens retreat on the Middle East conflict not expanding further so far. However the scope of the retracement so far is small compared to the major moves we saw last week. Risk assets are particularly strong today as S&P 500 futures rise 31 points, while commodity dollars opened with a bullish gap higher last night. That move has come despite an 11-point rise in 10-year Treasury yields across the curve.

NZD has been the top performer, gaining around 45 pips after conservative parties won the weekend election. Another geopolitical trade that is unwinding is crude Oil, which is trading around $2 lower from Friday’s close, although WTI is still up by 15 cents. Some of the thinking that is keeping it bid is that the talk of a ‘grand bargain’ where Saudi Arabia recognizes Israel in exchange for US security guarantees has dissipated. That is the talk that helped to cap the rally at $95 two weeks ago.

 GBP/USD has also shown some upside momentum today, although the gains remain limited and we decided to open a sell forex signal here earlier. After plunging to its lowest level since mid-March, this rebounded for more than a week earlier this month, reaching about 1.2340 last week. GBP/USD held its gains until Thursday when it made a reversal following the US CPI inflation report, which revealed that headline inflation remained unchanged.

We saw a 150 pip bearish reversal in the last two days of last week but the price is crawling higher today, but we decided to open a sell GBP/USD signal as the upside seems limited. The 100 SMA (green) has acted as resistance on the H4 chart before and is stopping the climb once again today, while the broader fundamentals point down for this forex pair.

GBP/USD