POUND STERLING TALKING POINTS
- UK housing price data continues to fall.
- High potential for NFP beat today.
- Pound rally showing signs of fatigue?
GBP/USD FUNDAMENTAL BACKDROP
The British pound has started the European trading session relatively muted against the USD after yesterday’s stellar ISM services and ADP employment change releases. Initial reactions favored the greenback as the Fed’s hawkish narrative was supplemented; however, this has since fallen away most likely due to the lack of historic positive correlation between ADP and NFP figures. That being said, with such a significant ADP beat, it is more likely that the NFP print will beat estimates and should drive support for the US dollar leaving cable exposed to the downside. Unemployment is projected to tick lower while focus will be on average earnings as has been the case recently to gauge its inflationary contributions.
Earlier this morning, UK housing price data (see economic calendar below) naturally dropped once again due to the current high interest rate environment bringing into question economic growth concerns and the return of stagflation term. Markets have largely dismissed this data this far but price volatility should pick up closer to the NFP release.
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GBP/USD ECONOMIC CALENDAR (GMT +02:00)
Source: DailyFX Economic Calendar
TECHNICAL ANALYSIS
GBP/USD DAILY CHART
Chart prepared by Warren Venketas, IG
Price action on the daily cable chart above shows elevated levels but may be in for a turn lower should NFP data beat estimates with the first port of call the 1.2680 swing support zone.
Key resistance levels:
- 1.2848
Key support levels:
- 1.2680
- Trendline support
BULLISH IG CLIENT SENTIMENT
IG Client Sentiment Data (IGCS) shows retail traders are currently 58% SHORT on GBP/USD (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment resulting in a short-term upside bias.
Contact and followWarrenon Twitter:@WVenketas
