Cable Facing Volatility As NFP Risk Event Looms

Key Points:

  • US Non-Farm Payroll figures likely to be critical for the Cable.
  • Cable largely appears to have discovered a bottom around the 1.2301 mark.
  • Expect plenty of volatility in the week ahead.

Last week was relatively positive for the Cable as it was buoyed by an improvement in the CBI Industrial Order Expectations, which proved stronger than expected at -3. In addition, the UK Preliminary GDP came in right on forecasts at 0.5% which is surprising given some of the preceding commentary from NIESR. Subsequently, the pair managed to close the week around 130 pips higher at 1.2471. The market is now likely to focus upon the US NFP result and the UK Manufacturing and Construction PMIs.

The Cable experienced a relatively positive week last week as it managed to cease most of the falls and end the week around 130 pips up at 1.2471. The initial rally was supported by waning USD sentiment early in the week as well as the US CBI Industrial Order Expectations figure which positively surprised the market at -3. In addition, the UK GDP figures came in on target at 0.5% despite some bodies suggesting that the time was now to start seeing some of the negative outcomes from the Brexit vote. Regardless, the Cable’s swing in sentiment managed to fight off most of the negative aspects of the stronger US Durable Goods Orders and Consumer Sentiment results.

Looking ahead, it’s likely to be a relatively busy week for the Cable as the pair faces down the volatile spectre of the US Non-Farm Payroll and UK Construction and Manufacturing PMI results. In particular, the NFP returns are expected to cause plenty of swings for the pair as their outcome remains fairly uncertain given some of the confusing moves within the labour market of late. In contrast the UK Construction and Manufacturing PMIs have proved relatively stable of late and their respective forecasts of 52.3 and 54.5 are likely to be met. Subsequently, the major risk event remains the NFP’s so keep a sharp watch for their inevitable impact.

From a technical perspective, the pair’s outlook is neutral for the week ahead given the fact that the RSI Oscillator remains almost flat, within neutral territory. In addition the 12 and 50 EMAs have turned relatively flat and trendless. At this stage, an upside breakout may occur but price action will need to surmount the 12 and 50 EMA’s before an entry could be made.Support is currently in place for the pair at 1.2412, 1.2309, and 1.2081. Resistance exists on the upside at 1.2593, 1.2768, and 1.3120.

Ultimately, the week ahead is likely to be dominated by the release of the Non-Farm Payroll and the UK Construction PMI data. Technical indicators are likely to largely take a secondary role as the market digests the US labour data results for any indication of the Fed’s direction at the coming FOMC meeting. Subsequently, keep a close watch on the result because it could play a relatively key part in setting the markets expectations over the next few weeks.

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