Points to be noted heading into data release
- GBP bulls have been buoyed by latest Brexit polls showing ‘remain’ vote gaining an edge over ‘exit’ vote. UK TNS EU poll released today showed 38% in favor of ‘remain’, 34% in favor of ‘leave’. 28% still stand undecided.
- However, oil prices are losing ground today and that is hurting risk sentiment, courtesy of which Cable dropped to 1.4350 levels.
UK data due today is likely to show –
- Jobless Claims dropped for Fifth Consecutive Month in March
- Average weekly including bonus to rise 2.3% 3M/y/y in Feb from Mar’s 2.1%
- Average weekly excluding bonus to rise 2.1% 3M/y/y in Feb from Mar’s 2.2%
An uptick in the average weekly including bonus may have been priced-in during Tuesday’s uptrend. Hence, it would take a better-than-expected figure for markets to consider buying Sterling amid oil price drop. Moreover, a strong wage growth and labor market figure against backdrop of Brexit polls showing “remain” vote in lead means a less reason for BOE to telegraph a delay in the rate hike. This could help Cable cut through offers around inverse head and shoulder neckline level of 1.4402.
On the other hand, a weaker-than-expected wage growth and labor market data could add credence to the technical failure at neckline level of 1.4402 seen in Asia today and may open doors for a drop to 1.43-1.4250 levels.
Pattern – Inverse Head and Shoulder
Resistance – 1.4368, 1.4402-1.4418, 1.4436-1.4459
Support – 1.4354, 1.43, 1.4255-1.4252
- GBP’s rebound from 1.4354 (23.6% of 1.3835-1.4514) could result in another re-test of inverse head and shoulder neckline level of 1.4402.
- When viewed against the backdrop of break from seen yesterday coupled with move in , the pair appears more likely to chew through offers around 1.4402-1.4418 and make a move to 1.4459 levels, beyond which a stiff resistance is seen at 1.45-1.4514 levels.
- Conversely, a dismal data may trigger a drop towards 1.43 handle, under which 1.4252 (50% of 1.4669-1.3835) stands exposed. However, bears need to observe caution as fresh demand could be anticipated on dips as long as 50-DMA at 1.4227 remains a .