The Obama administration’s plan to ease investors into the the final stress test report seems to have backfired as speculators are already anticipating problems and seeking safety in the U.S. Dollar.
The GBP USD is under pressure in early trading. This is a follow-through break after last week’s change in trend to the downside. The rally on Friday stopped inside of a resistance zone at 1.4732 to 1.4812. A break through 1.4576 will confirm a minor top at 1.4773. As more weakness develops in this pair, look for traders to go after the last swing bottom at 1.4397.
Speculation that one or more major U.S. banks are in trouble based on the preliminary stress test reports is fueling the weakness at this time. The down move may accelerate if fear sets in during the U.S. session and traders seek out the safety of the U.S. Dollar.
Expect volatility in the Forex markets until May 4th when the final results of the stress tests are released. Until then traders are going to speculate as too which banks have enough capital and which banks do not.
Based on the early trade it looks as if the Obama adminstration’s plan to ease investors into the final stress test report has backfired.