Dollar Rebound Continues, Sterling Corrects
Dollar’s rebound continues in early US session after stronger than expected ADP employement report which showed 158k job growth comparing to 125k consensus.
The ADP report, often viewed as a preview to NFP, suggest that we’ll get a stronger than expected number in Friday’s employment report. However, as seen in previous few months, a close correlation is not guaranteed.
Sterling was pressured earlier after disappointing industrial production and manufacturing production data that slipped back into the red. IP Dropped 0.4% mom while MP dropped 0.4% mom, instead of expected rise of 0.1% and 0.2%. Yoy growth for IP and MP were dragged down to 0.6% and 2.5% respectively. The down turn could continue on slowing demand from US and Eurozone and though it’s too early to peg the slide to a stronger pound, it will well be a factor in the months ahead. Chancellor of the Exchequer Gordon Brown predicted that economic growth in Britain will accelerate this year, growing 2.75% and as much as 3.25% next year, raised from previous 2-2.5% range he expected during march. But this is providing little support to Sterling.
We’ll have RBNZ rate decision in the coming Asia session and it’s expected that RBNZ will keep rates unchanged at 7.25%.
GBP/USD
Daily Pivots: (S1) 1.9665; (P) 1.9742; (R1) 1.9808;
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Cable retreats further to below 1.9634 today, suggesting a short term top is formed at 1.9846 alreayd. At this point, as long as cable stays below 1.9736 minor resistance, further correction is expected to follow towards 4 hours 55 EMA (now at 1.9546) or lower. However, downside should be contained by 1.9338/40 cluster support (50% retracement of 1.8834 to 1.9846 at 1.9340 and 38.2% retracement of 1.8517 to 1.9846 at 1.9338) and bring rally resumption.
On the upside, however, a decisive break of 1.9846 high is needed to signal recent rally has resumed for next upside target of 138.2% projection of 1.8090 to 1.9142 from 1.8517 at 1.9971.
In the bigger picture, break of 1.9554 high added much credence to the case that multi-year up trend from 1.3680 has resumed but this is not confirmed yet. Nevertheless, medium term up trend from 1.7047 is still treated as in force before a break of 1.9177 cluster support (50% retracement of 1.8517 to 1.9846 at 1.9182) or clear reversal pattern forms. Hence, at this moment, we’d still expected the medium term rise from 1.7047 to continue. On the upside, 2.0106 cluster resistance (1992 high, 100% projection of 17047 to 1.9024 from 1.8090 at 2.0067) will be the key resistance to watch out for. Decisive break of this resistance will confirm that long term up trend from 1.3680 has resumed.
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