The British pound remained on edge as investors waited for clarity on who will become the next prime minister after Boris Johnson’s resignation. It has already become a crowded race, with many influential leaders declaring interest. Rishi Sunak, the former treasury chief, has taken an early lead. Other notable leaders are Liz Truss, the former Foreign Secretary, and Nadhim Zahawi, the current Chancellor of the Exchequer. Conservative members will vote on their preferred candidates on Tuesday. After that, the two will tour the country seeking to win a majority of the 150k members of the Conservative Party.
The euro continued dropping against the US dollar as a carry trade between the two currencies emerged. The Federal Reserve has already hiked interest rates by 150 basis points this year. With the labor market strong and inflation rising, analyst believe that the bank will continue hiking interest rates. On the other hand, the ECB has maintained negative interest rates and hinted that it will hike by just 0.25% this month. This means that there is more demand for the US dollar than the euro. The euro will react to the latest euro area economic forecast by the European Commission. In Germany, ZEW will publish the latest economic sentiment data.
US stocks retreated slightly as investors waited for the latest American consumer inflation data scheduled for Wednesday. Analysts expect the data to reveal that the country’s headline CPI rose by 8.8% while core inflation retreated slightly. These numbers will come a few days after the US published strong jobs numbers. As a result, investors have priced in more tightening by the Fed. Most importantly, equities declined ahead of the upcoming quarterly results by top American firms. Some of the companies to watch will be Morgan Stanley, JP Morgan, Blackrock, and UnitedHealth.
GBPUSD
The GBPUSD pair dropped to a low of 1.1890 as the sterling sell-off continued. On the four-hour chart, the pair is below the 25-day moving average. It has also moved below the important resistance point at 1.1935, which was the lowest point on June 14. The Relative Strength Index (RSI) has moved below the neutral point. Therefore, the pair will likely have a relief rally since it has formed a double-bottom pattern.
EURUSD
The EURUSD pair continued retreating during the American and Asian sessions. On the daily chart, it has moved below the Ichimoku cloud and the 25-day and 50-day moving averages. At the same time, the Average Directional Index (ADX) has moved to the highest point in months. The ADX is used to measure the strength of a trend. The Relative Strength Index has moved to the oversold level. Therefore, the pair will likely break parity on Tuesday.
NAS100
The Nasdaq 100 index pulled back as investors waited for the upcoming earnings. It is trading at $11,968, which is slightly below last week’s high of $12,192. The index has formed a cup and handle pattern while the Relative Strength Index (RSI) has moved below the overbought level. Therefore, because of the C&H pattern, there is a likelihood that it will continue rising as bulls target the key resistance at $12,200.
