Sterling Holds Trend Line Support
Sterling is trading just above trend line support, as strength in the UK labor market, helped the pound rebound after slicing through trend line support. The bounce back prior to the US trading session, has caught a number of trader’s off sides, which could lead to a short squeeze during the US trading session.
The meeting minutes from the MPC meeting earlier this month do not appear to contain much the way of surprises. As hinted by recent official comments, there was much discussion about the extent of spare economic capacity and the role of sterling. However, there is no sign that Carney is losing in his effort to resist rate hikes this year.
Meanwhile, the UK labor market continues to strengthen, which pushed UK yields higher and allowed the pound to rebound from its lows of the day. The claimant count fell by another 34.6k in February. The consensus expected a decline of 25k. The January series was revised to show almost 34k fewer people filing unemployment claims rather than 27.6k in the initial estimate. The ILO unemployment measure was unchanged at 7.2%. Average earnings rose 1.4% in January from a revised 1.2% in December.
Later today the Fed will announce its interest rate decision. Traders are leaning toward dovish comments from Yellen the new Fed Chair. Any hawkish statement would push the pound through support level as the dollar gained traction.
The pound pushed through support on Tuesday and bounced back only to run into resistance near the 10-day moving average. A close below 1.6580, would spell trouble for the pound, as momentum is negative with the MACD printing in near its lowest levels in the past 6-months. The MACD index generated a sell signal in early March and continues to point to future negative price action.
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