Friday’s U.S. labor market report showed that the economy is still performing well overall. While the unemployment rate rose to 5 percent from 4.9 percent as more people entered the labor force, closely-watched average hourly earnings increased 0.3 percent. The uptick in wages and a solid 215k gain in payrolls add confidence that the U.S. economy will hold up against slowing global growth. The U.S. dollar strengthened in response to the report but gains were limited in the EUR/USD, whereas the cable came under increased pressure on the back of a weaker manufacturing PMI and amid concern that economic and political uncertainty could deter investment inflows from overseas.
As expected the short-term uptrend in the British pound has been reversed and the focus returns to the next support levels at 1.4150 and 1.4050. Short-traders efforts paid off last Friday as our short-entry proved to be profitable and reached our target of 90 pips. Before shifting our focus to next support zones at 1.4140 and 1.4120, the cable must break below 1.4170. After a break below 1.41 a next important support is seen at 1.4050. On the topside we expect upward movements to be limited until 1.4320 and 1.4345.
The euro marked a current resistance around the 1.1440-level. With a renewed break above 1.1415 we might see another test of that resistance level followed by a rise towards 1.1460 and further 1.15. Remaining below 1.14, we expect the 1.1350-level to lend a short-term support to the euro. However, below 1.1335 the focus will shift to the 1.13-barrier.
This week’s economic calendar is relatively light in terms of market moving data. Apart from the FOMC minutes on Wednesday we get some speeches from Fed Presidents throughout this week as well as a speech by ECB President Mario Draghi, scheduled for Thursday. The only important piece of U.S. data will be the ISM Non-Manufacturing index, due for release on Tuesday.
Sterling traders should pay attention to Tuesday’s PMI reports as well as Manufacturing and Industrial Production figures, due for release on Friday.
Today, the U.K. Construction PMI, scheduled for release at 8:30 GMT could have an impact on the British pound.
The FOMC minutes are not expected to be a big market mover as Fed Chair Janet Yellen has just reiterated the Fed’s approach to proceed cautiously in raising interest rates. Given that cautious outlook, the dollar could thus show further signs of weakness.
We wish all traders a good start to this week and many profitable trades.
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