Cable in a mixed mode on conflicting UK fundamentals, awaiting US inflation data
Cable is consolidating above two important supports at 1.1053/50 (Fibo 38.2% of 1.0348/1.1490 / psychological) following a short-lived dip below these levels and a quick rebound on Wednesday.
Near-term sentiment is mixed, as the Bank of England’s emergency bond buying program is scheduled to end on Friday, but the central bank signaled it could extend purchases if market conditions demand it.
On the other side, data released on Wednesday showed that Britain’s economy unexpectedly contracted in August, but economists still expect the BoE to continue to raise interest rates, in fighting the red-hot inflation, with wide expectations for 0.75% hike and 1% raise also being on the table.
Mixed fundamentals are complemented by conflicting daily studies, daily MA’s are in bearish setup but positive momentum is rising, with potential bear-trap under 1.10 to offer additional support.
Traders focus on today’s release of the US inflation data for September, which are expected to provide fresh direction signal.
According to forecasts, US consumer prices are expected to ease to 8.1% in September from 8.3% month, with release at / below consensus likely to cool expectations for very aggressive Fed in Nov 2 policy meeting and deflate dollar that would be supportive for sterling.
In such scenario, cable needs to rise and close above 1.1140 (20DMA / Fibo 38.2% of 1.1490/1.0922), to boost existing positive signal from Wednesday’s bullish engulfing pattern.
Conversely, pound would come under fresh pressure on higher than expected inflation figure and risk renewed probe below 1.10 zone that would signal continuation of a bear-leg from 1.15 double-top.
Res: 1.1139; 1.1209; 1.1276; 1.1360
Sup: 1.1053; 1.1000; 1.0919; 1.0784