A strong U.K. jobs report and weaker than expected U.S. inflation data has given cable another strong leg higher on Wednesday, sending it to a three week high and putting real pressure on a key resistance area for the pair.
The pair has since broken above 1.55 and trades within the 1.55-1.5530 region, at a new three week high. If we can see a daily close above this level – 50 fib level, ascending trend line, 89-day simple moving average and 233-period SMA on the 4-hour chart – it would suggest market bias has become much more bullish. Prior to today’s data, any rally was looking more like a correction than a more prolonged move higher.
Further resistance above this area can be found around 1.5570, a prior support level and 61.8% retracement of the move from 25 August highs to 4 September lows. Given the resistance levels that will have already been broken though, I don’t have much confidence in this and it could just offer temporary resistance.
Beyond this, we could see a move back towards 1.5820 – 25 August highs – although resistance could be found along the way around 1.5680-1.57, a key area of resistance for much of July and August.
A daily close below 1.55 could be quite a bearish signal, but at this stage that looks quite unlikely. We’re not seeing any sign of momentum loss in this rally.
Over the last couple of trading sessions, OANDA net client position has been on the wrong side of the market despite doing well the week previous. The current position suggests it is becoming increasingly net short at this resistance level. Given the moves of the last 48 hours, this could actually be a bullish signal.
N.B. The FOMC rate decision, statement, press conference and new economic forecasts on Thursday have the potential to cause excessive amounts of volatility in the markets, particularly those exposed to the US. Traders should be careful when in the markets around this event.