This article is originally referred from IronFX Intraday Comment.
• The dollar traded mixed against its G10 counterparts during the European day Wednesday. It was higher against JPY, CHF, AUD, NZD and CAD in that order, while it traded lower versus GBP. The greenback was virtually unchanged vs EUR, SEK and NOK.
• The British pound spiked higher following the UK jobs market report that showed a decline in the unemployment rate in May and accelerating average weekly earnings. However, as with the CPI data on Tuesday, the labor data are pre-referendum and do not necessary reflect the current condition of the country. It is noteworthy though that despite the EU referendum looming at the time, the jobs market continued to recover taking the unemployment rate below 5% for the first time since 2005. As we have noted several times this week, the preliminary PMI data for July due out on Friday are the key data investors await. This will be the first set of data that will reflect the post-Brexit era and will probably set the tone for sterling’s near-term bias. As such, we would treat today’s bounce in GBP with caution and will prefer to wait for Friday’s data before trusting the recent rally.
• GBP/JPY traded higher during the European morning Wednesday following the encouraging UK employment report for May. The pair rebounded from near the 138.10 (S1) support territory and now looks to be headed towards the resistance hurdle of 141.25 (R1). Although the rate is still trading below the upside support line taken from the low of the 11th of July, given the inability of the bears to break below 138.10 (S1), I would switch my stance to flat for now. A break above the 141.25 (R1) resistance may carry more bullish extensions and perhaps aim for the 143.40 (R2) hurdle. On the downside, I would like to see a decisive break below 136.40 (S2) before I get confident that the recent recovery is over and that the short-term outlook is back to the downside. Such a move is possible to open the way for our next support territory of 133.25 (S3). Zooming out to the daily chart, I still see a longer-term downtrend. Therefore, I would treat the recovery started on the 11th of July, or any possible extensions of it, as a corrective phase of that longer-term down path.
• Support: 138.10 (S1), 136.40 (S2), 133.25 (S3)
• Resistance: 141.25 (R1), 143.40 (R2), 146.30 (R3)
Original Source: IronFX Intraday Comment