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Markets expect an answer from Boris Johnson, the pound struggles – Market Overview

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Miguel A. Rodriguez
Miguel A. Rodriguez
05 November 2022
The dollar continued to gain ground amid a surge of risk aversion in the market.

The dollar continued to gain ground amid a surge of risk aversion in the market.

Although we saw some of the fears fade late in the session, the US is causing stocks to rebound from lows as did yields from Treasury bonds.

In any case, the US dollar remained strong throughout, improving from a technical perspective as we approach the end of the week.

As we can see in the DollarIndex chart, the #dollar is approaching the resistance level located at 93.97, an area with an overcoming that opens the way to new gains up to 94.74, the previous maximum reached at the end of September, and where the 100-day SMA passes.

The Japanese yen remains firmer as a result of increased risk aversion with  USD /JPY breaking below the 100 hourly SMA at 105.37 and heading towards the main support around the 105.00 area.

The concern is the general trend of the market due to the different fronts of open risks that do not find an immediate solution and that raise the level of uncertainty.

Failed negotiations on the US fiscal stimulus plan and Brexit are among the key issues, and the latter will be of great interest to the market as the day progresses, with Boris Johnson on a deadline to offer a response to the EU on whether the UK will continue negotiations beyond this week.

The currency pair that best reflects this high degree of uncertainty is GBP/JPY, which, as we can see in the graph, has broken down the 100 and 200-day SMAs in recent days and is trading below the 135.80 support zone, while heading towards the zone of lows at the end of September between 134.80 and 135.00.

The economic data published on the day such as the euro area CPI lose interest as market-movers, and the market's attention will be focused on the potential advances on the American fiscal stimulus package, something that seems to have stagnated, along with the British Prime Minister's response to the EU. These facts will be those that regulate the general risk sentiment of the market.

This information/research prepared by Miguel A. Rodriguez does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk.The research provided does not constitute the views of KW Investments Ltd nor is it an invitation to invest with KW Investments Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.The research analyst in not employed by KW Investments Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation, or particular financial needs before making a commitment to invest. The laws of the Republic of Seychelles shall govern any claim relating to or arising from the contents of the information/ research provided. 

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Miguel A. Rodriguez
Miguel A. Rodriguez
Financial Writer

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books.