The June 15 jobs data revealed Wages in the UK rose at their fastest pace since August 2011 at 2.7% while the present unemployment rate for under 16 years of age remained at 5.6% since December – February 2015. The 16 -64 years of age category also held steady during the same period at 5.8% based on current data from the UK Office of National Statistics. A cursory view however what’s important is the dramatic effects GBP interest rates and yields had on that one June 15 release. UK Yields from 3 month — 1 year now trade above USD yields. The UK 2 year yield trades below USD but is currently bumping up against USD. Interest rates spiked to current peaks and hasn’t moved since June 15. As mentioned dips will be bought and GBP will hold in small ranges. So far that has been the case and the future appears to hold the same promise. But the spike in yields and interest rates also represents a vote of confidence in the BOE hiking the Bank Rate sometime in the future. What changes the present course for the BOE is for bad data to appear. Then look out below GBP as it will drop like a rock and the distace to travel below is very far and wide. The next Wage release date is Ausist 12.
GBP/USD. The rough patches of Resistance above at 1.5800’s are many and begin at 1.5826, 1.5853, 1.5893 and 1.5896. Most important in this series is 1.5893. To go higher, GBP/USD must pass above all points. Overall, shorts are meant to sell below 1.5800’s but GBP is held in small small ranges due to trades at the front end of the curve.
The Current Range is found between 1.5530 — 1.5479 and 1.5477. Its a 51 – 53 pips range. Below 1.5479 and 1.5477 comes next 1.5393, 1.5324 and 1.5301. Above 1.5530 then next 1.5609, 1.5688, 1.5712. Above 1.5530 — 1.5688, ranges open wide and more volatility seen as the range bcomes 158 pips wide.The point at !.5712 holds prices to see 1.5800’s.
Price closed at 1.5504 and dead on a Support / Resistance point. To see shorts and to target 1.5479 and 1.5477 then 1.5504 must break lower. Points above on the way to 1.5530 begin at 1.5504, 1.5506, 1.5507, 1.5508, 1.5509, 1.5512 and 1.5521. The range between 1.5504 – 1.5509 is a dead neutral zone. If price holds below 1.5504 then shorts is the way to target the area at 1.5479 and 1.5477.
Brian Twomey Inside the Currency Market, btwomey.com