EURUSD: the pound is dragging down the majors

On Monday the 2nd of September, trading on the EURUSD pair closed slightly down by 0.19%. The euro managed to bounce from 1.0958 on the back of a rise on the EURGBP cross. The bulls ran out of steam in today’s Asian session. The pound is once again dragging the other majors down with it. GBP has shed the most against the dollar at 0.61%, slipping to 1.1971.

The GBPUSD pair dropped 100 pips to reach 1.2060 due to pressure from weak British data as well as an increased risk of a snap election being called in the UK.

The currency market is being shaken by rumours that if the British parliament passes legislation to block a no-deal Brexit, Prime Minister Johnson will immediately announce a snap election for October.

Day’s news (GMT+3)

• 11:30 UK: Markit construction PMI (Aug).
• 12:00 Eurozone: PPI (Jul).
• 16:45 US: Markit manufacturing PMI (Aug).
• 17:00 US: ISM non-manufacturing PMI (Aug), construction spending (Jul).
• 23:30 US: API weekly crude oil stock (30 Aug).

Current situation

US stock exchanges were closed yesterday due to Labor Day. In today’s Asian session, the EURUSD pair was dragged down by the pound to 1.0931. Considering the breakout of the support on the weekly timeframe and expectations of a stimulus package from the ECB, mid-term buyers are unlikely to enter long positions for the time being.

The centre of attention today is the ISM non-manufacturing index in the US as well as news from the UK on a possible election and trade negotiations between the US and China. After tomorrow’s ADP report, attention will shift towards Friday’s payrolls.

The indicators on the daily and weekly timeframes suggest a continuation of the downwards trend. There’s a divergence on the AO indicator on the hourly timeframe. The conditions for a correction are ripe, but there’s no pattern to suggest that an upwards impulse towards the LB line (at 1.0988) will be triggered. It’s unclear for how long the cross will favour the bulls. If the dollar starts to undergo a correction, the euro will benefit from this more than the pound. This will give us a target of 1.0983 on the EURUSD. If the dollar stays strong for the rest of the day, we’ll have to keep an eye on the EURGBP pair, because with a strong dollar and a drop on the cross, the euro will slip to 1.0900.