Cable rises further as dollar failed to react on US inflation data
Cable rose further on Wednesday and broke above Fibo barrier at 1.3675 (76.4% of 1.3834/1.3161 bear-leg) to pressure 1.3700 zone (Nov 4 pre-BoE high / psychological) with 200DMA (1.3735) coming in sight.
Sterling benefited from fresh risk appetite after US inflation hit multi-decade high in December, boosting
expectations for Fed’s three to four rate hikes in 2022, but dollar stayed unaffected by the data, mainly to Fed Powell’s caution and less hawkish than expected stance in his testimony on Tuesday.
With BoE widely expected to increase rates for another quarter of percent in its policy meeting in early February, increased short-term divergence between the US and UK rates may further lift pound.
Bullish technical studies support the scenario, with sustained break of pivotal 1.3700/35 zone to confirm and open way for extension towards 1.3834 (Oct 20 lower top / Fibo 61.8% of 1.4249/1.3161 fall) and 1.3909 (weekly cloud top).
Overbought daily techs suggest that bulls may face headwinds, with dips towards 1.3577/61 (broken Fibo 61.8% of 1.3834/1.3161 / rising 10DMA) to offer better levels to re-enter bullish market.
Res: 1.3698; 1.3735; 1.3800; 1.3834
Sup: 1.3620; 1.3607; 1.3577; 1.3550