GBP/USD boosted by strong post-lockdown rebound
This week’s UK data dump has kicked off with the latest jobs report showing another drop in unemployment to 4.8% in the three months to March. In spite of the latest lockdown, things are looking rosier now in the jobs market with a spike in unemployment due to the ending of the furlough scheme not expected to be as bad as originally feared. The service sector and the hospitality industry especially may prove more robust as the economy rebounds and this is giving the bulls every reason to buy sterling. Tomorrow’s inflation data shouldn’t trouble the Old Lady due to “transitory” effects explaining most of the expected jump.
Cable has gone north today on its third straight day of gains with bullish momentum pushing it quickly through last week’s highs around 1.4167. We’ve been bullish sterling for a while and importantly, the dollar strength after the punchy US CPI figures didn’t crack the 1.40 level which we hghlighted was key for more upside. With this now acting as strong support below, GBP/USD looks set for the February high at 1.4241. The post-Brexit vote high at 1.4376 lies above here while longer-term bulls will be ogling the huge psychological 1.50 barrier. That is a level for further out, with plenty of BoE speakers this week to keep us on guard and listening to the wires.
GBP/JPY onwards and upwards
We wrote a week ago about GBP/JPY hitting resistance but if prices could hold above 153.41, then the bulls could push on. Well, that’s exactly what happened with risk sentiment not enough to harm the powerful bullish trend in this pair. Some consolidation in the last few sessions above that April high has only empowered buyers to push higher so we now have longer-term highs from February 2018 at 156.61 firmly on the radar. We’ve also just scythed through the 200-month SMA for longer-term traders so this and the 153.41 level act as firm support and a place for stops. Again, watch risk sentiment and overbought signals, but sterling crosses have a habit of going a lot further than you think so the “trend is your friend” and the ascending channel is the way to go with this pair.