Sterling Breaks Out; Technicals Point to Higher Prices
Sterling broke out and traded above former resistance which is now support near 1.666. Thursday’s worse than expected US retail sales data eroded the value of yields in the US and allowed sterling to gain traction and move higher. The technicals continue to point to higher prices as momentum has climbed accelerating to the upside.
On Thursday the US released two pieces of economic data which allowed the dollar to sink to new lows for 2014. Retail sales came in a -0.4% month over month compared to the -0.1% expected by economists. The ex-transportation retail sales report came in flat which was in line with expectations. December’s series was revised lower for the core moving to a 0.3% increase from the originally posted 0.7% increase.
Initial jobless claims increased by 8,000 to 339,000 in the week ended February 8, according to the Labor Department. That was above the 330,000 forecast by economists. Last week’s number of 331,000 was unrevised. The four-week moving average of claims, which evens out week-to-week changes, rose slightly to 336,750.
Sterling broke above resistance near 1.666 and continued to rise throughout Friday’s trading session. Support is seen near the 10-day moving average near 1.6450. Momentum on the currency pair is strong with the MACD (moving average convergence divergence) index generated a buy signal. This occurs when the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread. The index moved from negative to positive territory confirming the buy signal. The RSI (relative strength index) moved higher with price action reflecting accelerating momentum while printing at 67, which is on the upper end of the neutral range.
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