The hawkish attitude of the Governor created strong upside movement
British Bank Stress Test results showed yesterday that the banking sector can withstand enough pressure without major risks, while Mark Carney, the Governor of the BOE expressed his optimism regarding economic outlook and monetary stability.
The hawkish attitude of the Governor created strong upside movement yesterday but the pair encountered heavy resistance at 1.5125.
Today at 13:15 GMT we take a first look into U.S. jobs situation, with the release of the ADP Non-Farm Employment Change. Although this report is not as important as the Government data that comes out Friday, the greenback is likely to respond strongly if the numbers differ from analysts’ forecast. Figures above the anticipated 191K are beneficial for the US Dollar and the opposite is true for lower numbers.
From a technical point of view, we expect Pound strength as long as the pair remains above 1.5050 so we favour another push towards 1.5125. The bullish trend lines seen on price and on the Relative Strength Index will provide support but a break may trigger additional bear strength and extended moves lower. Both Exponential Moving Averages (50 EMA and 100 EMA) are flat but still bearish so look for a bullish (upside) cross to confirm a potential move north.
How to trade
We favour end of day Calls once a full hourly candle is closed above the 100 period Exponential Moving Average. If 1.5125 resistance is hit, we expect bounces lower.
A break of 1.5050 horizontal support, combined with a break of both trend lines seen on the chart above would invalidate the bullish scenario and would open the door for bearish movement. The same is true if the US jobs report comes out better than anticipated.