GBP/USD: Subdued Ahead Of UK Election Results

 | May 07, 2015 06:14AM ET


There is expected to be much volatility today and tomorrow as results from the general election start to filter through.


Based on recent polls the election will probably result in a hung parliament with neither of the major parties winning a clear majority.


It is then probable that Labour and the SNP will do a deal and create a new coalition government. Labour is more pro-E.U than the other main party so this will probably be positive for sterling.


Although there may be qualms about labour's record on the economy I still see sterling strength as the most likely outcome initially as the threat of a referendum on E.U membership recedes.


Regardless of the outcome, the technical picture is undecided, with a slight bias to the upside: on the one hand we remain within an up-trend from the April 13 lows, although the recent pull-back has been strong and led to the formation of a v.short-term down-trend.


It could go either way from here, but a break above the 1.5290 highs would break the mini-correction and mark a resumption higher to major resistance at 1.5380.


Alternatively a break below the May 4 lows at 1.5089 could see an extension lower to support at 1.4950.