Good day forex peeps! Here’s an update on the cable or the GBPUSD pair which I last posted on June 17 (kindly see my previous entry here). Contrary to what I thought would happen, the sterling pound had risen against the odds and had broken several significant resistances during the past two weeks to place itself above high ground. Zooming closer to its 4-hour time frame, the cable is seen to have been trekking a rising channel. At present, the pair seems to be approaching the channel’s resistance after it bounced from the formation’s support. But with the stochastics in the overbought area, it could move sideways or even retrace for awhile before continuing its journey north. If it weakens, a possible downside target would be the previous high just above 1.5100 or at the channel’s support. In any case, as long as the channel remains intact, the pound would most likely move higher.
Yesterday’s price action surprised a lot of traders and investors like me as the its dollar relationship moved away from its present theme. Usually, any downbeat economic updates from any of the major economies would spark some risk aversion which then would lead the traders back to the safety of the greenback and the yen. This was not the case yesterday. The higher-than-expected weekly initial jobless claims in the US (472k vs. 454k), the worse-than-projected drop in the ISM manufacturing PMI (56.2 vs. 58.9), and the sharp slide (30.0%) in pending home sales rocked the equities markets once again, causing the major indices to lose more than 1.0%. The non-dollar currencies like the GBP, however, rallied. It seems like investors had priced the US’s weak economic fundamentals back in the USD at least yesterday. Is this a start of a new trend? May be not but we will see in the coming days and months.
Today’s non-farm employment change (NFP) report in the US would surely cause some pre-fourth of July firewoks. US firms are seen to have slashed about 110,000 workers in June, marking the country’s first job loss in four months. Such drop or worse would likely place a lot selling pressure on equities again. If the ADP’s gauge is correct then the government’s actual count could come in worse than the market’s estimate. Its impact on currencies, though, is quite blurry due to yesterday’s correlation break. Nonetheless, expect some volatility among the major currency pairs during the time of the report’s release. Stay on your toes!