GBPUSD: Anticipating the next advance
“…It's appropriate for the Fed to gradually and cautiously increase our overnight interest rate over time, and probably in the coming months such a move would be appropriate”.
That comment from Federal Reserve chair Janet Yellen on Friday gave the USD a bid heading into a long weekend (for both the US and UK).
Money market pricing now suggests a better than 60% chance of a rate hike by the Federal Open Market Committee's July 27 meeting.
Markets are now starting to build up a head of steam but this Friday’s employment report will need to at least match expectations (175,000 jobs added) to maintain the momentum.
Ahead of that, tomorrow’s price index of Personal Consumption Expenditures (PCE) report is expected to confirm inflation is continuing to rise, albeit at a snail's pace.
In the UK the only potentially market moving data will be Thursday’s manufacturing PMI. Otherwise GBP will be subject to Brexit polls.
Management and risk description
Sterling has already successfully completed a “hard retest” of its multi-week Inverse Head and Shoulders reversal formation (see daily chart below) to maintain its upside objective of 1.5130.
Entry: Today/tomorrow, Buying any dip to the 1.4580/1.4555 support area.
Stop: 1.4516, initially.
Target: 50% at 1.4940 and 50% at 1.5108.
Time horizon: Allow several weeks for both targets to be met.
GBPUSD daily chart (click to expand)
GBPUSD weekly chart (click to expand)