Forex Trading Mind

Like most other pundits, I was wrong in my prediction last Thursday that the Conservative Party would win a landslide victory in the British General Election. In fact, although they emerged as the largest party in Parliament, they failed to secure a majority, worsening their position following an election they chose to hold. I’ll explain more about what this means for the British Pound later, but first, a few words about how the British political system works so future scenarios can be understood.

With only a few hours to go before the polls close as at the time of writing, I believe it is clear the Conservatives will win a landslide victory in this election, rivalling the majorities achieved by Margaret Thatcher in the 1980s. The Conservatives have not won big since 1987, so this would be the first such result in 30 years. Betting odds are implying a majority between 100 and 125 seats.

Although the market-defining EUR/USD currency pair looks to have failed again earlier today to breakout above the crucial resistance at 1.1250, the Euro has been the strongest currency of this week so far, rising against its main partners the U.S. Dollar, Japanese Yen, and of course the British Pound.

Britain goes to the polls in less than 10 days, on 8th June, to select a new government in a General Election. The election was called early by the Conservative Prime Minister May, who took over following former Prime Minister Cameron’s resignation after his defeat in the Brexit referendum last year.

I mentioned yesterday that the U.S. stock market is still very strong, with the key benchmark S&P 500 Index, composed of the 500 largest U.S. stocks by market capitalization, was only about 10 points off an all-time high. I’ve also written before about how important all-time highs are in stock markets, as a good statistical indicator that still higher prices are going to happen shortly. Furthermore, there is no stock market in history that has done as well as consistently in terms of prices going up, as the U.S. stock market. These factors add up to a convincing case that it’s beneficial to be long of major U.S. stocks or the major stock index right now.

Last week was a strong week for the Euro: the currency rose by more than 2% against the U.S. Dollar, partly due to weakness in the Dollar, partly due to the market finding renewed faith in the success of the European project following Emmanuel Macron’s victory in the French Presidential election.

I wrote yesterday about how journalists were attributing the Euro’s recent weakness to President Trump’s political problems.

In my weekly forecast “pairs in focus” piece yesterday, in which I review the prospects for the coming week in the markets, I’d highlighted possible long trades in EUR/USD and GBP/USD and this is the way the market looks to be moving today, with a nicely “directional” London session moving against the U.S. Dollar.