GBP has been boosted on EU Referendum data this week, but will now be tested with GDP releases and Fed-Hike relevant US Data.

FUNDAMENTAL

GBP has managed to out-do even the superstrong USD this week to continue its bull trend.  Data released by Survation yesterday (May 25) showed voters are 54/46 in favour of remaining in the EU, which pushed GBP higher for the day.

Top tier releases for the pair today and tomorrow are:

Thursday 26 May:

UK GDP Data (09.30)
US Durable Goods Data (13.30)

Friday 27 May:

US GDP Data (13.30)
US Core PCE (13.30)

(Times are GMT+1)

Time for a GBP reality check as UK revised GDP is released this morning.  Initial estimates beat expectations last month but there are concerns that delayed investment (pending June’s EU referendum) could have slowed economic activity.

On the USD side, last week’s FOMC minutes commented that a June Fed rate rise is on the table if certain economic factors are satisfied. 

Broadly, in order to give clearance for a June hike the Fed wants to see:

– A rejection of the general loss of momentum present in March’s economic data
– Signs of real inflation
– maintained or increasing levels of domestic spending (watching PCE)
– Maintained or increasing levels of manufacturing and production

US Durable Goods Data was poor in March and April so meeting or exceeding the estimate is exactly the news that the Fed is looking for to show that March was just a blip: expect it to boost the dollar.  Same with PCE tomorrow and of course solid GDP data is essential.

TECHNICAL

The GBP rally continues but faces headwinds as it approaches its weekly target.  The pair has so far moved neatly from Weekly M2 towards Weekly M4 (Chart A).


To hit the aggressive S2 target at 1.4826 it must first break through the former recent high level at 1.477.  Daily, 4 hour and Hourly stochastics are overbought indicating that bears are providing resistance and progress past this point will  be a challenge.

Bad Brexit or UK GDP data could send the pair back to recent support at 1.465.

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