Cable Bulls Wait In The Wings For The Coming Week
- Monitor the UK CPI and Claimant Count figures.
- Pair likely to retain its bullish bias for the week ahead.
- Volatility likely to continue until Trump Cabinet is Announced.
The cable has had a rocky few sessions as the pair has faced some sharp volatility following the U.S. election result. Subsequently, it makes sense to review last week’s events and consider what may potentially lay upon the horizon for the venerable pair.
The cable was one of the few net beneficiaries of last week’s U.S. Presidential Election as, due to a range of technical and fundamental factors, it rallied late in the week to close around the 1.2594 mark. In fact, Friday’s bullish run has taken it to a high not seen since prior to October’s flash crash. The rally was largely fuelled by news that President-Elect Trump had spoken with the UK’s Prime Minister to renew the “special relationship”. This saw the pair moving strongly higher and was exacerbated by a surprisingly strong UK Manufacturing Production result of 0.6% m/m. Subsequently, the cable ended the week on a strong note with plenty of bulls still waiting in the wings for the coming week.
Looking ahead, there are some key fundamental events looming on the horizon with both the UK and US inflation indicators due for release shortly. In particular, the UK CPI figure will be closely watched given last month’s strong uptick. The forecast has the metric rising fractionally to 1.1% y/y but watch for variation. In contrast, the US Core CPI results are less certain and the risk of a flat or negative result is ever present. Subsequently, keep a watch on the US inflation results closely as it may very well help to determine the Fed’s direction within their December FOMC meeting.
From a technical perspective, the cable’s bullish direction has taken price action back above the 50EMA which seems to suggest that the pair will retain its rising trajectory in the coming week. In addition, the RSI Oscillator has been steadily trending higher and still has some room to move before becoming overbought. Subsequently, expect the pair to continue rising to challenge the 1.26 handle but watch for any short term pullbacks. Support is currently in place for the pair at 1.2352, and 1.2081. Resistance exists on the upside at 1.2593, 1.2768, and 1.3120.
Ultimately, the pair is likely to remain relatively bullish but it still faces the need to break out of its current range and above the 1.2600 handle if it has any chance of closing the gap on the 1.30 handle. However, watch out for the ongoing resurgence of the US dollar as there is likely to be further gains in the coming weeks as President-Elect Trump largely pushes the message of a renewed focus on economic growth.