The UK election takes place on Thursday, and sterling traders are bracing for volatile trading conditions in the pound, especially in the last few trading sessions of the week as the results hit the market. Any surprises are likely to come after London closes, potentially causing significant moves in the thinner liquidity of late New York and early Asian hours as the final picture becomes clear.
Polls are pointing to a resounding Labour victory, with current expectations that they will pick up 450 of the 650 available seats in the House. Traders anticipate less volatility around this outcome, especially if early results support it, reducing the chances for surprises and volatility during the day. However, we could see strong currency trends in the weeks following the election as the new government reveals its economic plans, which have been somewhat opaque so far.
Things could get particularly interesting if the Conservatives or the Reform party gain more constituencies than expected, leading to a hung parliament. This scenario would introduce significant uncertainty to the market, likely causing a downside correction. Any signs of unexpected success for the Tories or Reform should lead to sharp moves during the results process, providing good trading opportunities for agile traders.
Currently, Cable is trading within familiar ranges and near short-term support. Most expect the dollar side of the trade to dominate movements if Labour wins strongly as predicted. However, technically, any deviation from a strong Labour victory could lead to new breaks into lower ranges, with initial support on the Daily chart just above 1.2550 at the long-term trendline and 200-day moving average. Relief rallies are expected to be capped around recent highs just above 1.2700, with longer-term resistance now just under 1.2850.
Resistance 2: 1.2860 – June High
Resistance 1: 1.2708 – Yesterday’s High
Support 1: 1.2567 – 200-Day Moving Average and Trendline Support
Support 2: 1.2296 – 2024 Low
