The British pound remains close to multi-month highs against the euro during early Friday trading. Sterling gained ground yesterday, after the Bank of England adopted a more hawkish stance by announcing that asset purchases of £895 billion a month will remain in place until its benchmark rate reaches 0.5%, a significant shift from the previous target of 1.5%. Elsewhere, foreign exchange traders will be focused on the release of US non-farm payrolls later today. The American new jobs report is likely to provide direction for the dollar, which has been caught in a tug-of-war between those who believe the Fed should bring forward the timing of the tapering and others who still see reasons for concern in the state of the country’s labour market. A positive number, in this case anything in excess of 900,000 new jobs created during the month of July, would be likely to force the hand of the Fed to start tapering its purchases in the not-too-distant future, offering support to the dollar. On the other hand, a disappointing figure would feed into the narrative of those who believe the recovery still has some ground to cover before stimulus can be reduced; a scenario likely to cause losses to the greenback.
The strength of the US dollar is keeping the pressure on safe havens like gold with the precious metal continuing to drop on Friday. Bear traders seem to be in control of the market on a very short-term basis and even if no significant sell-off has been registered so far, the current correction saw the price fall through a significant support level and opened the door to new lows. However, the technical bearish breakout of the mid-term bullish channel hasn’t been confirmed by the RSI indicator yet, which keeps the possibility of bear trap alive. To validate such a scenario, the market will have to get back inside its channel and clear $1,808, meanwhile the bearish outlook holds sway with the next supports found at $1,800 at $1,794.50 precisely.
Asian shares slid lower overnight as the regulatory crackdown from Beijing continued to dent market sentiment, which led to a mixed opening in Europe as traders await key US data in the afternoon. While fears related to the prospect of significant changes in the regulatory framework and potential tax hikes towards big companies yin China linger, today’s market consolidation can also be seen as investors taking some profits following the record levels achieved on stocks earlier this week and ahead of this afternoon’s highly anticipated US NFP. Even if most investors expect higher market volatility later today, many aren’t sure of the direction stock prices will take. It is a complicated case here as the US NFP could be considered as bad news in both outcomes: poor data could suggest the economic recovery is losing momentum while a solid jobs report could bring the tapering of the massive stimulus closer to us than many expected. Technically speaking, one of the most reassuring configurations comes from London as the FTSE-100 Index is still trading above 7,100pts following a bullish break-out of its short-term flag.
Pierre Veyret– Technical analyst, ActivTrades
Disclaimer: opinions are personal to the authors and do not reflect the opinions of LeapRate. This is not a trading advice.
Experienced writer and journalist, working in the global online trading sector, Steffy is the Editor of LeapRate. She has previous experience as a copywriter and has been with the company since January 2020. Steffy has a British and American Studies degree from St. Kliment Ochridski University in Sofia.
