GBP/USD Daily Signals – December 29, 2017

Sterling continues to rise against dollar

We believe that in the upcoming months we are unlikely to observe any substantial developments in the flow of economic data. If accompanied with more of the same on the inflation side is probably to result in the FOMC being careful on adding to the five rate hikes which is already implemented and reason for us to maintain our view of further dollar weakness over the upcoming months.

The wholesale and retail inventories and backward revisions during November were widely as reported with our expectations but a strong increase in autos and auto parts exports foreshadowed more drawdown of auto inventories than we forecasted in Q4 during November. The wider-than-expected real trade deficit for November indicates more burden from real net exports in Q4 than we anticipated.

Due to difficulty with seasonal adjustment, the incoming claims data may show raised volatility during the holiday season. The initial employment claims for the week ending on 23 December were constant from the previous week at 245k. The four-week moving average increased gradually from 236k to 238k.  The unemployment claims data remain at a historically low level assessing the volatility and continue to indicate a strong labor market. We anticipate this trend to continue as strong measure of employment achievement restores on next year.

The employment index declined to 1.8pp but remained exalted at a 55.3. We are consistent with our anticipation that the nonfarm payroll employment raised probably at a beneficial pace during December.

Technically, on four hourly charts, the GBP/USD pair has been rising with a good support located at the 1.3407 level. The pair continues to climb higher heading for a retest at the 1.3446 levels. A retest of the pair breaking here should look forward at the 1.3484 level. The pair’s next resistance lies at the 1.3508 levels. The pair’s oscillator trading at the 71.00 level is rising and inches higher supporting the case for a rebound and looks for consolidation pattern from the 1.3407 levels. The pair is still in progress with a strong support holding the levels. The price action indicates a shift in momentum towards an upside bias with pair closing above the break of trend line. The pair looks for corrective an upward bias with price action confirming the bullish movement. The pair’s medium term rally is still in progress from the support area of market towards the upward momentum.  The pair seems to be stronger with the sustained trading above the 1.3446 level. This will confirm a strong long term momentum. This will remain the favored case as long as support holds paving the way to reach level at the 1.3484.


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