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Cable extended lower breaking S1 at 1.3940

Market Analysis


UK labour data revealed an unexpected tick higher in the jobless rate, to 4.4% in December from the 4.3% four-decade-plus low that had persisted since last July. The median forecast had been for unchanged 4.3% rate. Average earnings data, which is a metric that the BoE, and thereby sterling markets, keeps a close watch on, rose 2.5% y/y in the three months to December in both the with- and ex-bonus figures, which matched expectations in the case of the former and exceeded expectations, by 0.1 point, in the case of the latter. Pay awards continued to lag inflation, which rose at a 3.0% y/y in the headline CPI gauge in January.

Sterling dipped in the immediate wake of the data release as markets reacted to the unexpected lift in the jobless rate, despite the second-highest surplus released seen since 1993. The GBPUSD is currently at the bottom of the consolidation area seen this week. The market this week reversed back the 61.8% of last week’s gain’s, with pair traded at mid 1.39s, on the lower Bollinger Bands for a 3rd consecutive day.  The daily Indicators are mostly neutral which suggests that Cable might staying further in a consolidation mode. However, with the pair currently being in the bottom of this range, which confluence also with the immediate Support level as given by PP analysis, a break today below this area will extend a rally lower. This break will suggest a visit lower down to the 50-DAY EMA and the lows seen last week, at 1.3750-1.3800 area. Immediate resistance come as the 20-DAY SMA, at 1.4025. 

Meanwhile a move above the peak of the week, could open the path up to 1.4060 – 1.4100 area.

The short term picture, remains on the bearish side of the movement, as pair is traded below all 3 Exponential Moving averages. The 20-period EMA crossed downwards the 200-period EMA, earlier, confirming the intra-day weakness of the instrument.  The hourly momentum indicators are negative. MACD turned to negative earlier, while Stochastic and RSI are at around 30, pointing lower, something that suggests that there is further downwards space for today.


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Andria Pichidi

Market Analyst


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