Is this a false dawn for the pound ahead of the election next week?
The high today touched 1.3063 but price action is largely centered around 1.3030-50 over the past two hours since the break higher earlier in the session.
For me, price action is essentially sitting in a bit of a dangerous territory at the moment. It appears that pound traders aren't too eager to price in an election move - in this case a majority win for the Conservatives - just yet.
As such, we're seeing price run stops above 1.3000-10 and the October highs but there hasn't been a strong follow through move towards the 1.3100 level and even potentially a run towards the 6 May high at 1.3185.
This essentially tells us that while stops are hit, buyers aren't too convinced to build on that considering election risks that are still present.
As such, just be wary that we could see price start to retrace later in the day if buyers start to feel exhausted in trying to keep the momentum here going.
However, if there is an extension towards 1.3100 or higher, we can take that as an indication of election outcome pricing and it will come down to what happens on 12 December.
Looking ahead today though, just be wary that we also still have US data to deal with. The ADP employment and ISM non-manufacturing data are both due today and may have help to skew price action later in the session.
If anything, keep an eye on the ISM non-manufacturing data. A poor reading there may not just precipitate dollar weakness but present further jitters to risk amid worries surrounding the US economy as seen from the ISM manufacturing data on Monday.
