Daily Forex Analysis: GBP/USD: Markets Gear Up For Super Thursday

GROWTHACES.COM Forex Trading Strategies

Taken Positions

USD/JPY: long at 123.70, target 125.80, stop-loss moved to 124.30, risk factor *

Pending Orders

EUR/USD: sell at 1.0950, target 1.0750, stop-loss 1.1030, risk factor *

USD/CHF: buy at 0.9745, target 0.9940, stop-loss 0.9675, risk factor *

USD/CAD: buy at 1.3120, target 1.3320, stop-loss 1.3040, risk factor *

AUD/USD: sell at 0.7350, target 0.7205, stop-loss 0.7400, risk factor *

NZD/USD: sell at 0.6560, target 0.6405, stop-loss 0.6630, risk factor *

EUR/GBP: sell at 0.7030, target 0.6830, stop-loss 0.7085, risk factor *

EUR/CHF: buy at 1.0645, target 1.0990, stop-loss 1.0580, risk factor *

GBP/JPY: buy at 194.40, target 196.40, stop-loss 193.60, risk factor **

 

EUR/USD: Weaker ADP And Rather Dovish Powell Do Not Change Bearish Outlook

(sell at 1.0950)

• ISM services sector index rose to 60.3, its highest reading since August 2005, a sign of confidence that the non-manufacturing sector, which accounts for more than two-thirds of US economic activity, was growing swiftly. Expectations were for a reading of 56.2. The data stands as another point in favor of the Federal Reserve raising rates at its next meeting in September, in line with our expectations. The business activity index rose to 64.9 from 61.5. What is important the employment component bounced to 59.6 last month after falling 2.6 points to 52.7 previously. New orders increased to 63.8 from 58.3 and new export orders rose to 56.5 from 52.0. Prices paid edged up to 53.7 versus 53.0 previously.
• The Commerce Department said the US trade gap increased to USD 43.8 billion from USD 40.9 billion in May. The trade data likely will have a marginal impact on the second quarter GDP estimate released last week, as the deficit on the goods balance came in a bit higher than the advance figure incorporated in the GDP report. In that report, the government estimated the economy expanded at a 2.3% qoq annualized pace, with trade adding 0.13 percentage point to GDP. But following stronger-than-forecast construction and factory inventory data, GDP would be revised to at least 3.0% annual rate when the government publishes its second GDP estimate later this month.
• ADP National Employment Report showed US private employers hired 185k workers in July, which was the smallest increase since April. June private payroll gains in June were revised down to 229k from an originally reported 237k increase. The ADP figures come ahead of the US Labor Department’s more comprehensive non-farm payrolls report on Friday, which includes both public and private-sector employment. The ADP will probably reduce expectations of a strong jobs reading on Friday.
• Fed Governor Jerome Powell said Federal Reserve policymakers have not yet decided whether to raise interest rates at a closely watched meeting next month, adding data on the labor market in particular would be key to that decision.
• The USD inched lower yesterday after weaker-than-expected ADP release. But the upbeat ISM report helped offset a slowdown in US private job growth and comments from Fed Governor Jerome Powell that were in contrast to more hawkish comments from Atlanta Fed President Dennis Lockhart.
• In our opinion Fed hike in September is very likely and the short-term outlook on the EUR/USD is clearly bearish. We are looking to get short at 1.0950. There is a scope for a break below 1.0810 (low on July 20) soon. If our order is filled we will set the target at 1.0750.

Significant technical analysis’ levels:

Resistance: 1.0946 (session high Aug 6), 1.0969 (10-dma), 1.0988 (high Aug 4)

Support: 1.0847 (low Aug 5), 1.0812 (low Jul 21), 1.0810 (low Jul 20)

 

GBP/USD: Markets Gear Up For Super Thursday

(stay sideways)

• The GBP rose today as more investors bet that the Bank of England was edging closer to an interest rate hike in the coming months. The Bank will release a slew of information at 11:00 GMT, combining several major policy announcements that were previously made separately. It will simultaneously publish its monthly decision on rates, the breakdown of how its policymakers voted along with a summary of their debate, and its quarterly forecasts for Britain’s economy, including inflation.
• The first reaction will most likely be on the number of dissenting votes. We expect three dissenting votes: Martin Weale, Ian McCafferty and David Miles. But the market expects only two dissenters. That is why the initial reaction could be GBP-bullish. In our opinion the scope for rises will be limited in case of three dissenters and the rate may not break above the resistance at 1.5701 (61.8% fibo of 1.5930-1.5330). However, there is a low risk of really significant rises in the GBP/USD, because Kristin Forbes is another member who has sounded “hawkish” in the past. If there are four dissenters, then our view is that it will be taken as a strongly “hawkish” signal by the markets.
• We stay sideways on the GBP/USD, but keep our bullish outlook on the GBP/JPY and bearish outlook on the EUR/GBP.

Significant technical analysis’ levels:

Resistance: 1.5653 (high Aug 5), 1.5679 (high Jul 31), 1.5691 (high Jul 29)

Support: 1.5598 (session low Aug 6), 1.5526 (low Aug 5), 1.5492 (low Jul 27)

 

AUD/USD Falling After Mixed Jobs Data

(sell at 0.7350)

• Australia’s seasonally adjusted unemployment rate increased to 6.3% in July from an upwardly revised 6.1% reported in the previous month and above market consensus of 6.0%. The economy added 38.5k jobs, above the market forecast of 10k and the number of unemployed increased by 40.1k. Full-time employment rose by 12.4k and part-time employment was up by 26.1k. The seasonally adjusted labour force participation rate increased to 65.8% from 64.8% in June.

• The AUD/USD initially gained after the data, as the employment growth beat expectations. But it faded quickly as the report also pointed to a rise in the unemployment rate to a six-month high.There was something for bulls and something for bears in this release.
• We should notice that hiring in Australia has surprised with its strength for months now, leading some investors to doubt the credibility of the data given the economy is still running at a sub-par pace. Annual employment growth stood at 1.9% in June, only just below that of the United States.
• Market pricing implies a 44% chance of a quarter-point easing in the cash rate to 1.75% by the end of the year. In our opinion the RBA will keep rates steady for an extended period.
• The AUD/USD is back in bearish mode after it rose on Tuesday on RBA tempering its call for AUD drop. We have lowered our sell offer on this pair to 0.7350. If the order is filled the target will be 0.7205.

Significant technical analysis’ levels:

Resistance: 0.7398 (Aug 5), 0.7428 (high Aug 4), 0.7438 (high Jul 22)

Support: 0.7300 (psychological level), 0.7264 (low Aug 4), 0.7260 (low Aug 3)