The FP Markets research team produce First Light News during the early hours of the European session, ensuring traders and investors are up to date in the FX space for the day ahead.

Good morning.

GBP/USD Eyeing Lower

Sterling was an interesting market yesterday, with GBP/USD putting a cap on any follow-through upside derived from Monday’s 0.7% recovery. You must feel for those traders attempting to navigate the currency pair around the $1.25 handle. Following the release of UK jobs data on Tuesday, price dived through $1.25, reaching a low of $1.2465, only to reclaim $1.25+ status an hour later, reach a high of $1.2547, and then return sub $1.25 heading into US hours. Unemployment in the UK rose 0.1 percentage points higher to 3.9%, and employees (payrolled) decreased by 136k in April. Though average earnings (excluding bonuses) were higher at 6.7% in Q1 (Jan-Mar). Therefore, it is still too early to tell whether we see a cooling jobs market here.

BoE Governor Bailey steals the spotlight later this morning at 10:50 am GMT+1 with a keynote speech at the British Chambers of Commerce Global Annual Conference. The text is to be published here.

Technically, chart studies continue to favour further selling. I noted this in yesterday’s piece, though here’s a reminder (italics):

Although the currency pair has rallied higher for the last eight weeks, upside momentum was slowing and price took a dive last week after shaking hands with a long-term weekly trendline resistance and daily resistance coming in at $1.2638. Therefore, the break of $1.25 is not surprising from a technical standpoint, and further selling is potentially on the radar, targeting as far south as daily support from $1.2272. However, H1 support calls for immediate attention at $1.2463.

(Trading View)

US Dollar Inching Higher

The US dollar appears optimistic. According to the US Dollar Index, price action rebounded from the upper side of its 50-day simple moving average (currently fluctuating around 102.36), placing a bold question mark on daily resistance at 102.65ish. US retail sales data were released yesterday, rising less than expected at 0.4% in April (0.8% consensus), with YoY retail sales coming in at 1.6%, down from 2.4% in the twelve months to April. Core retail sales (excluding autos) also came in at 0.4%, which was a touch lower than the 0.5% consensus. The immediate aftermath in the Dollar Index caused short-term choppy price action between 102.34 and 102.45. Though as of current trading, the buck is moderately higher. In other news, US President Joe Biden and Republican Kevin McCarthy continued US debt limit negotiations yesterday and, according to McCarthy, the two sides remain ‘far apart’ on an agreement to increase the debt ceiling. However, he did add that it was possible to seal a deal by the week’s end.

Aside from housing data released just ahead of the US cash open today, It is a quiet session ahead regarding economic events.

(Trading View)

USD/JPY Technically Interesting

Weekly action is fast approaching resistance coming in at ¥137.23, though AB=CD harmonic resistance also calls for attention north of this barrier at around ¥140.34. Out of the daily timeframe, we also see the currency pair closing in on the underside of the 200-day simple moving average around ¥137.05. We are also clearly pencilling in an ascending triangle between ¥129.64 and ¥137.91, which a breakout north could see price confront nearby daily resistance at ¥139.55.

Shorter term on the H1 chart, price is on the doorstep of ¥137 (alongside RSI negative divergence). Given its close relationship with weekly resistance at ¥137.23 and the 200-day simple moving average, this could be an interesting resistance. Therefore, this area is likely to be closely monitored today.

(Trading View)

Major Currency Markets as of around 8:25 am GMT+1:

(Trading View)

Headline Events for the Day Ahead:

Annual Inflation Rate (Final) for the Euro Area for April at 10:00 am GMT+1 (Expected: 7.0%; Previous: 6.9%).

Bank of England (BoE) Governor Bailey will Speak at 10:50 am GMT+1.

US Building Permits (Preliminary) for April at 1:30 pm GMT+1 (Expected: 1.437M; Previous: 1.430M).

Thanks for reading. Have a great day!

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.