Dollar stabilising, GBP subject to Brexit polling

FUNDAMENTALS

There are not many official releases to monitor for the remainder of this week: notable data includes:

UK manufacturing (June 8 at 09.30 BST) and
US unemployment (June 9 at 13.30 BST)

Other than this Cable will be trading off Brexit polling data, for which there is no release schedule, and Fed speeches.

Fed Chair Yellen spoke yesterday with a typically neutral message, stating that inflation, the strength of the economy and global risk factors would continue to be measured.

This effectively confirms that a June hike remains off the table and Fed Funds Futures confirm with only an implied 3.8% implied chance of a rate hike.

Yellen’s speech in fact served to dampen optimism of a July rate hike, with Fedwatch moving the probability from c.30% down to 25.8% today.

That said after an initial pricing correction Dollar should remain strong.

Sterling is having a tough time: Brexit polls suggesting a Leave vote may win in 23 June’s EU Referendum has struck a bearish tone despite moderately positive economic fundamentals.  If trading cable (or any GBP pair) you should keep aware of any polls publication, which can move GBP’s price very quickly.  Taking on the general sentiment of the campaign at the moment it seems possible that further polls will indicate a Brexit lead and weigh on the Pound.

A couple of hours before London open Cable spiked over 180 pips in one minute, a move being attributed to a fat finger although the timing of thin volatility plus bearish GBP could make one suspect it was possibly more calculated: in any case sellers piled in and price has retraced to 23.6% of the original move.

TECHNICALS


If we ignore the ridiculous spike, price seems to be capped at the monthly pivot, which is also approximately the weekly pivot.  This implies a move down to S2.

S2 is in line with some longstanding static support toward the lower end of Cable’s recent range which would provide.

A new lower low and lower high would help to confirm a break out of the blue channel to the down side, selling on the confirmed lower high down to MS2.

Medium term static resistance at 1.43 would need to be broken then we would be on course for MS2 at arppoximately 1.41.