July 15, 2021 15:04:21

Solid UK job numbers briefly sent the pound higher this morning. Unemployment claims fell in June while wages were up strongly in May with the 7.3% gain outperforming the prior print of 5.7% and beating consensus of 7.1%. Although unemployment ticked up a tenth to 4.8%, this figure is artificially low due to the furlough scheme which ends in September. With “Freedom Day” on track for next week, less slack in the labour market should complimented by an even greater demand for workers in the coming months.

Perhaps more interesting were comments by the normally dovish BoE member Saunders who made the case for an approaching removal of monetary stimulus. He proposes ending QE in the next month or two rather than early next year, without exhausting the purchases target. It is quite probable that other MPC members will adopt a more hawkish tone as strong reopening data comes in, ahead of their next meeting on August 5.

Weekly Chart: Still bullish

The June selloff in cable looks to be stalling as the pair trades below and now above 1.38. We can see a series of bullish “hammer” candlesticks on the chart over the past few weeks. These patterns indicate that sellers entered the market pushing prices down but were overwhelmed by buying interest. This often suggests that the market is positioning for trend reversal. We are currently trading below long-term trend support, so bulls need to keep the pair above 1.3752/31 which is Fib support and recent lows to push higher.

On the daily chart, the June selloff looks overextended, but buyers need to push up above last Friday’s high at 1.3903 to signal more upside. A return to 1.40 is then possible where the 50-day SMA and long-term trend support/resistance lies. Key support is 1.3731 ahead of 1.3670.