Election Uncertainty Pressuring British Pound

Concerns over a hung parliament following the U.K. electionhelped to weaken the GBP USD overnight.

Concerns over a hung parliament following the U.K. electionhelped to weaken the GBP USD overnight. Although the Sterlinghas bounced off of its low, worries still linger that without majorityleadership in the U.K.,the ruling party may have difficulties implementing the austere financialmeasures necessary to gain control over the budget deficit.

The Euro is trading higher. Oversold conditions are theprimarily driver behind today’s rally. Pressure has been mounting on theEuropean Central Bank to step in and attempt to instill confidence in the Euro.Among the techniques being discussed are restructuring risky loans, offeringzero percent loans and buying troubled debt in Greece,Portugal and Spain. As we nearthe close the real test will be whether hedge funds and large speculators pressthe Euro lower ahead of the week-end, or do they cut positions. Either way,volatility is expected to remain high.

The USD JPY is trading higher after getting crushed on Thursday.Overnight the Bank of Japan weakened its currency by injecting 2 trillion Yeninto the market. The Dollar/Yen rallied after this move and has been able tohold on to those gains most of the day. The firmness in this currency pairsuggests that stocks may try to mount a rally later in the day.

The USD CAD is trading lower. On Thursday this pair ralliedsharply higher when panic hit the stock markets. The easing of tensions in theequity markets is helping to drive the Dollar/CAD lower at the mid-session.Technically, this market is trading back inside of a retracement zone which maymean the start of a corrective break. 1.0463 is the new resistance. A breakthrough 1.0366 will indicate weakness. Based on the short-term range of .9929to 1.0738, the next downside target is 1.0333 to 1.0238.

This weakness in the equity markets has pressured the AUDUSD all week. Today’s relatively calm conditions are helping to stabilize theAussie. Based on the main range of .9387 to .8708, the market may attempt torally back to a retracement zone at .9047 to .9128.