August 16, 2021 13:25:00
We have a plethora of UK data this week, as is always the case in the middle part of the month. Jobs, inflation, and retail sales are released from tomorrow which will all help or hinder the BoE’s recent optimistic outlook. The furlough scheme still supports the employment numbers while inflation is forecast to moderate and bad weather may have slowed retail sales. The bank is most focused on inflation which they see spiking higher in the near-term before moving back to target over the medium term. GBP is expected to outperform during this period versus most if its peers as the MPC has a relatively more hawkish outlook than other central banks.
GBP/USD struggling to move higher
Last week’s Q2 GDP figures failed to lift sterling. In turn, more dollar strength on a safe-haven basis or Fed taper talk in the FOMC minutes midweek will weigh on cable. The descending trendline from the start of June high is acting as tough resistance. The 50-day and 100-day SMAs are also now above and below 1.39 so an additional barrier to more upside. Above 1.3981/83 towards 1.40 is the clear target for the bulls.
Support sits at last week’s low at 1.3790 which is just above the 200-day SMA at 1.3772. A sustained drop below here would take the major down to the low 1.37s with March and April lows around 1.3660.
GBP/AUD near cycle highs
This pair has been on a steady upward path since the start of the year. Prices tracked sideways for a few Spring months before moving higher in a bull channel. This series of higher highs and lows peaked out at the end of July at 1.8972. We’ve traded in a range since backing off the top in bullish consolidation mode.
With the weak Chinese data this morning, domestic lockdowns and falling iron ore prices, the aussie has buckled and prices are moving higher once more into the year-to-date high. This area is key as previous highs from early 2019 also come in around this mark. The 50% retrace level of the March 2020 and January 2021 move is above at 1.9150, if bulls can move past 1.8972. Support lies at 1.8756.
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