The British job report for December on 16 January was generally weak and drove the pound down in most of its pairs. Claimant count change was 11,700 against the approximately 3,000 expected. While total average earnings for November were weaker than expected at 6.5%, this is still a big annual change and suggests the persistence of inflation in the UK over the next several months. Inflation has come down strongly in the UK since the second quarter of last year but it remains higher than in the USA.
Usually, technical analysis would expect a breakout from a range in the direction of the previous trend in the absence of a clear pattern or shape on the chart. That might be possible in this case because the price has generally held close to the upper area of the range with no signal of buying saturation. However, British inflation on Wednesday is an important release which might provide a new driver and invalidate the current technical picture.
A potential buyer in this situation might traditionally set a pending order around the 200 SMA near $1.255 with a target around the latest high or maybe a bit higher. It’s difficult to see how the price could move back above $1.29 over the next few weeks unless upcoming data are notably surprising. The potential advantage of using a pending order as inflation approaches is that if the figure is surprisingly low the trader could simply delete the buy limit rather than be trapped in a losing position for possibly a long time.
Key data this week
Bold indicates the most important releases for this symbol.
Wednesday 17 January
7.00 GMT: British annual headline inflation (December) – consensus 3.8%, previous 3.9%
7.00 GMT: British annual core inflation (December) – consensus 4.9%, previous 5.1%
7.00 GMT: British monthly headline inflation (December) – consensus 0.2%, previous negative 0.2%
7.00 GMT: British monthly core inflation (December) – consensus 0.4%, previous negative 0.3%
13.30 GMT: American retail sales (December) – consensus 0.4%, previous negative 0.3%
Thursday 18 January
13.30 GMT: initial jobless claims (13 January) – consensus 207,000, previous 202,000
Friday 19 January
7.00 GMT: British retail sales (December) – consensus negative 0.5%, previous 1.3%
15.00 GMT: Michigan consumer sentiment (preliminary, January) – consensus 70, previous 69.7
Usually, technical analysis would expect a breakout from a range in the direction of the previous trend in the absence of a clear pattern or shape on the chart. That might be possible in this case because the price has generally held close to the upper area of the range with no signal of buying saturation. However, British inflation on Wednesday is an important release which might provide a new driver and invalidate the current technical picture.
A potential buyer in this situation might traditionally set a pending order around the 200 SMA near $1.255 with a target around the latest high or maybe a bit higher. It’s difficult to see how the price could move back above $1.29 over the next few weeks unless upcoming data are notably surprising. The potential advantage of using a pending order as inflation approaches is that if the figure is surprisingly low the trader could simply delete the buy limit rather than be trapped in a losing position for possibly a long time.
Key data this week
Bold indicates the most important releases for this symbol.
Wednesday 17 January
7.00 GMT: British annual headline inflation (December) – consensus 3.8%, previous 3.9%
7.00 GMT: British annual core inflation (December) – consensus 4.9%, previous 5.1%
7.00 GMT: British monthly headline inflation (December) – consensus 0.2%, previous negative 0.2%
7.00 GMT: British monthly core inflation (December) – consensus 0.4%, previous negative 0.3%
13.30 GMT: American retail sales (December) – consensus 0.4%, previous negative 0.3%
Thursday 18 January
13.30 GMT: initial jobless claims (13 January) – consensus 207,000, previous 202,000
Friday 19 January
7.00 GMT: British retail sales (December) – consensus negative 0.5%, previous 1.3%
15.00 GMT: Michigan consumer sentiment (preliminary, January) – consensus 70, previous 69.7