POUND STERLING ANALYSIS & TALKING POINTS
- US GDP, NFP and JOLTs supportive of pound.
- Upcoming US economic data under the spotlight for cable – Core PCE & NFP.
- Head & shoulders neckline still relevant.
GBPUSD FUNDAMENTAL BACKDROP
The British pound has rallied against the US dollar today after US GDP and ADP employment change data (see economic calendar below) missed estimates showing some slowdown in the US economy. The focal point was the ADP release considering yesterday’s JOLTs (job openings) numbers fell short of estimates. Confirmation by both sets of data sets now heighten expectations around an NFP (Non-Farm Payroll) miss as well. Although recent correlations between ADP and NFP have been far from positive, current data cannot be ignored heading into Friday’s NFP report. Another positive from the ADP report came via a continued slowdown in pay growth that has been a key contributor to inflationary pressures in the US.
Earlier this morning UK mortgage figures provided mixed signals to markets but did not move the cable needle too drastically. Falling consumer credit numbers suggest a slowing economy which can weigh negatively on the pound should this continue.
GBP/USD ECONOMIC CALENDAR (GMT +02:00)
Source: DailyFX Economic Calendar
The Bank of England’s (BoE) interest rate expectations are relatively similar to where they were previously and with this week focused mainly on US specific factors, this is unlikely to change. Money market expectations for the Fed’s first rate cut has already shifted back to May from June pre-ADP, increasing central bank divergence with the BoE remaining on the hawkish path while the Fed looks to shift towards a more accommodative stance.
Trade Smarter - Sign up for the DailyFX Newsletter
Receive timely and compelling market commentary from the DailyFX team
BANK OF ENGLAND INTEREST RATE PROBABILITIES
Source: Refinitiv
TECHNICAL ANALYSIS
GBP/USD DAILY CHART
Chart prepared by Warren Venketas, IG
Introduction to Technical Analysis
Candlestick Patterns
Recommended by Warren Venketas
Price action on the daily cable chart above places the head and shoulders pattern in question after bears tentatively broke below the neckline last week Friday. Bears will be eyeing a confirmed close below the 1.2548 swing low that could open up the 1.2500 psychological handle and beyond. That being said, the upcoming core PCE release and NFP releases could provide a change in the current dynamic which should leave traders very cautious heading into these high impact and potential volatile risk events.
Key resistance levels:
- 1.2900
- 1.2848
- 50-day moving average (yellow)
Key support levels:
- 1.2680
- 1.2548
- 1.2500
- 200-day moving average (blue)
BULLISH IG CLIENT SENTIMENT (GBP/USD)
IG Client Sentiment Data (IGCS) shows retail traders are currently net SHORT on GBP/USD with 52% of traders holding short positions (as of this writing).
Download the latest sentiment guide (below) to see how daily and weekly positional changes affect GBP/USD sentiment and outlook!
Introduction to Technical Analysis
Market Sentiment
Recommended by Warren Venketas
Contact and followWarrenon Twitter:@WVenketas
