GBP consolidated its footing against the dollar during trading yesterday and stayed firm against falling NZD, AUD, JPY, CHF and EUR in today (May 18)’s Asian session despite of lower UK CPI figures yesterday.

The main deflationary pressures were deemed to be air fares and clothing, the latter suggesting that UK Retail figures announced tomorrow (May 19) could be soft.

FOMC Minutes are out later and could move the pair: in reality the market has given up on a June Fed Hike but the Fed may want to keep the meeting “live” and to do so might be vaguely hawkish in their comments.

Fundamental

Wednesday 18th May: UK Earnings, claimants and unemployment data (09.30) and US FOMC Minutes (19.00) (Times GMT +1)

Sterling sank against the dollar on weak CPI data (0.3 vs est 0.5) and US CPI coming in on target.  However these contrasting releases failed to send the pair significantly lower.

This implies bullish presence in the market, possibly encouraged by an ORB/Telegraph poll released yesterday that showed increasing support for the “Remain” vote at next month (June 23)’s referendum on EU membership.

The muted reaction to CPI data and GBP’s maintained strength in the Asian session suggests that a large Brexit risk premium may have been weighing on GBP which is starting to lift.

Applying this to today’s employment data announcement, risk seems to be to the upside and small miss could have a diluted effect.

Technical

GBPUSD sank on yesterday’s UK CPI miss and US match.  However the pair found support at around 1.4432, the top end of a recent support zone.

Price has touched the daily M2 pivot which implies a target of M4 at 1.455 (Chart A below).

Chart A

Chart A

This aligns nicely with the weekly pivots: price previously touched weekly M2 and the weekly M4 target it 1.4544 (Chart B below).

Chart B

Chart B

H1 and D1 stochs are oversold and rolled under ready to rise: the only slight fly in the ointment is H4 stoch which is at about 50% and bearish.

A big miss for UK employment could send the pair down to previous recent support at 1.434, but in most scenarios GBP seems positioned to tread water or increase in value against the dollar today.

 

 

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