The GBP/USD was unable to push to new lows despite FOMC Chairwoman Yellen’s optimistic comments at the close of last week. The dollar started to rally at the start of the week with cable pushing towards the lows. But the pair found support at 1.4750 and was unable to push lower from there. After much choppy price action between 1.4750 on the downside and 1.4870 on the upside, the USD finally succumbed when the U.S. non-farm payrolls was released on Good Friday. The thin liquidity of the markets, however, was not enough to send the GBP/USD over important resistance at 1.50.
Again, despite the Yellen-induced, lower low from the previous week, the GBP/USD was unable to make new lows on the weekly chart. The markets seized on the headline jobs number missing expectations big on Friday and rallied hard at the end of the week. Due to the holiday, liquidity was exceptionally thin with many market participants gone for the long Easter weekend. So we did not see cable break resistance as many bulls may have expected. This puts me at pause. When the markets open on Tuesday, expect to see the USD weaken as traders come back from holiday and react to the U.S. jobs report. However, will this stick? Personal income and average hourly earnings still rose last month. According to ISM, manufacturing prices increased last month too. Unemployment claims also dropped significantly despite the slow down in hires. While the market starts to reprice The Fed’s interest rate hiking cycle I fear the market may be getting a little ahead of itself. There is still good reason for the FOMC to still raise rates and as early as June.
The daily chart now supports a bullish rally above 1.50. Momentum on the RSI is very constructive. Though still below 50, it seems that momentum bottomed out at the lows of last week. Friday’s rally moved momentum to new highs indicating that GBP/USD bulls will be in control to start the new trading week. Because the dovish fundamentals for the GBP, buyers will have a tough time moving to new highs. If price does break above 1.50, we will need to see confirming action into next week’s trading to really see that the pair is ready for a sustained bullish run.
This is an excerpt from this week’s issue of Quid Report. Subscribers receive my research on all major GBP pairs at the top of the week, including access to @faithmightfx on Twitter for daily, real-time calls and adjustments to the weekly report. AVAILABLE NOW.