Big Move in British Pound vs Euro and USD Forecast this Week, as Break-Out Looms
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This week brings with it some front-line UK economic data releases - they could just be the ticket to unleashing a notable move in Pound Sterling that one analyst tells us is overdue.
GBP is holding on to its recent advances against its two major trading partners with markets apparently quite eager to play it cautious ahead of Thursday’s PMI data release and Friday's US employment release.
Month-end looms and with Friday’s non-farm payrolls following on hard behind, "we may see a reflective mood rather than dramatic action," notes Kit Juckes at Societe Generale.
With UK economic data having provided a windfall to Sterling of late, there will be nerves that this uptrend in GBP and good news could be rudely undermined on Thursday.
Therefore, caution to be the watchword for Sterling - we anticipated neither big buying or selling interest in the near-term.
What are therefore witnessing are a number of GBP-based pairs forming tight ranges, like a winding spring.
Paul Ciana, a technical analyst with Bank of America Merrill Lynch Global Research reckons the spring will ultimately be triggered:
"The post brexit trading range is consolidating tighter and tighter and a breakout could be looming. If cable were to close through 1.3280 it would provide a technical signal that the brexit gap may finally be filled.
"We remain trend bearish with our longer term view and would prefer to sell such a rally. In fact a break below the lower support line of about 1.29 would suggest a continuation of the downtrend.
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