Powering the Pound: Global Currencies Forecast

April 4, 2019 9:11AM CDT

The June dollar opened at 96.620 on Thursday and has moved higher in morning trade. It seems the dollar has found some support through safe haven buying as yesterday’s optimism towards global sentiment dwindles. Adding to the upside today is the fact that jobless claims came in below expectations by 10,000, bringing the 4-week average back to its historic low seen in October. However, my belief is that this upside will be short lived as the tone of the Fed has been increasingly dovish over the past few months – the probability of a December rate cut is on the rise – the dollar is unlikely to keep up its strength.

From a technical standpoint, both the recent high and the recent low in the dollar are lower than the previous, hinting at weakness ahead. Since foreign currencies move against the dollar, we expect them to strengthen throughout the year as investors look to alternative outlets for their money. In particular, the British pound stands to benefit from a turning of the American business cycle. It has showed relative strength compared to the yen and the euro over the last few weeks. Fundamentally, the “Brexit” situation is weighing on the pound. As parliament wraps up this decision and moves toward a soft exit, I believe it will advance in its charts. Even in the face of a hard or no-deal exit, the intermediate to long term outcome should remain the same after the dust settles. For now, the trend in the pound is sideways, and resistance is seen at 1.3210, and a break through this level should cause a run toward 133.

British Pound Jun '19 Weekly Chart

British Pound Jun '19 Weekly Chart

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