GBP/USD at a Crossroads

GBP/USD at a Crossroads

Chart Of The Day

GBP/USD at a Crossroads

Sterling has been remarkably resilient in the face of weaker data. Yesterday GBP held firm despite lower consumer prices and today, it recovered all of its earlier losses despite significantly weaker than anticipated wage growth. According to our colleague Boris Schlossberg, “UK claimant count declined by a whopping -42K vs, 1,1K eyed but the figure was based on a new measuring method by the ONS and was ignored. Unemployment remained the same at 4.8% but the weak link in the data proved to be wages. Average wages declined to 2.6% from 2.8% eyed with the weakest growth in the private sector which saw the pace decline to 2.8% versus 3.2% the period prior. Clearly, UK consumers are having a difficult time keeping up with cost of living increases and their indebtedness is now highest in Europe. All of this makes it much less likely that the BOE will even consider tightening rates in 2017 as the economic conditions are less robust than they appear.” There are no major U.K. economic reports scheduled for release on Thursday but the slowdown in wage growth points to weaker retail sales on Friday. Between the softness of U.K. data, rise in U.S. rates and the change in Fed fund expectations we expect GBP/USD to retreat soon.

Technically GBP/USD is trapped between the 20-day and 50/100-day SMA cross. It tested the lower bound a number of times and the fundamentals suggest a downside break. However a firm close below 1.2375 is needed for GBP/USD to see 1.22. If it breaks above 1.2550 we could see a stronger move up to 1.2700

EUR/USD – At Crossroads

EUR/USD – At Crossroads

Chart Of The Day

This has not been a good week for the euro. After spiking to 1.1600 at start of trade the pair has lost more than 200 points in a clear case of sentiment exhaustion. As Kathy has been pointing out for the past several days, seasonal factors likely to weigh on the pair through the month of May and the gross overbought positioning from the CFTC data suggests that there is more selling to come.

Tomorrow the market will the get a look at the marquee event of the week with consensus looking for a 200K in new jobs. The prior data has been mixed with ADP report markedly lower but ISM Non Manufacturing employment subcomponent rising by nearly 3 points. If the NFPs prove stronger than expected they will provide the perfect excuse of the long EUR/USD positions and could take the pair through the 1.1300 figure before the day is over.

Dollar at Crossroads Weekly Forex Technicals 8.27-8.31.13

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