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Sterling Steady’s Following MACD Sell Signal

David Becker
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Sterling Steady’s Following MACD Sell Signal

Sterling held steady on Wednesday after tumbled to new trend low on Tuesday. The yield differential has moved in favor of the greenback, despite equity markets, which have declined sharply over the course of the last week. UK labor data was mixed, with the unemployment rate dropping but the claimant count-missing expectations.

The U.K. labor data was mixed relative to expectations, with the August ILO unemployment figure dropping more than expected in making a new cycle low of 6.0%, compared to expectations of 6.2% down from 6.2% last month, while the headline September claimant count were below forecasts, at -18.6k, down from -33.2k in August.

The average household income data was in line with expectations at 0.7% year over year with-bonus figures, and 0.9% in the ex-bonus number both still negative in inflation-adjusted terms.

Traders will be watching U.S. retail sales data to determine if the dollar will be able to continue to generate interest. September retail sales figures, are expected to print a flat headline and a 0.2% ex-auto drop. The release faces downside risk from declines in vehicle sales, construction hours-worked, gasoline prices, and stock prices, alongside a sideways trend in chain store sales on the month.

The best correlation between the weekly chain store data and monthly retail sales comes from the relationship between the Johnson Redbook weekly chain store figures and the General Merchandise components of retail sales. The Redbook pattern was similar to last month, with an early month acceleration that tapered off over the course of the month.

The GBPUSD currency pair dropped to a new trend low, breaching support and closing below 1.60. Momentum has turned negative with the MACD (moving average convergence divergence) index generating a sell signal. This occurs when the spread (the 12-day moving average minus the 26-day moving average) crosses below the 9-day moving average of the spread. The next level of target support is 1.58.

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