Pound-to-Dollar Rate Over Next Five Days: Tech Forecast, Data, and News
The Pound-to-Dollar rate is short-term bearish but long-term bullish say charts. In the week ahead US jobs data and fresh UK sector specific data for December are expected to be the primary drivers.
The Pound-to-Dollar exchange rate is rising after breaking above a key long-term trendline which began in 2014 and is clearly shown on the chart below.
A break above a major trendline is a very bullish sign for a pair and indicates further probable upside on the horizon and a possible change of the medium to long-term trend.
The daily chart shows the price action since the break above the trend-line in more detail.
The pair broke above the trendline, then pulled back to retest the trendline again before resuming its uptrend.
It is now approaching the previous December 1 highs at 1.3552, and a break above those highs would probably lead to an extension higher up to a target at 1.3600 where the R1 monthly pivot is situated.
The R1 monthly pivot could be an obstacle to further upside since traders often anticipate resistance at these levels, which leads to increased order flow as speculators attempt to make a quick profit on the expected pull-back.
A clear break above R1, however, confirmed by a move above 1.3620 would see the exchange rate properly break out of the range and move up towards a target at 1.3700 at the level of the R2 monthly pivot.
Data and Events for the US Dollar
Probably the most important release in the week ahead is the US Bureau of Labour Statistics monthly report on the state of the labour market, also known as Non-Farm Payrolls (NFPs), which is out at 13.30 GMT on Friday, January 5.
The NFP headline figure shows the number of new jobs filled in the last month, in this case, December.
There are also other important data components contained within the report, including average hourly earnings, private payrolls, the unemployment rate and the participation rate, which measures what percentage of the population is actively seeking work.
It is important to the Dollar because it is an indicator of inflation pressures since the more people who are in work and earning money, the more they tend to spend that money and the more inflation tends to go up.
Higher inflation tends to lead to higher interest rates, which increase inflows of foreign capital, drawn by the promise of higher returns, and this increases demand for the currency, driving up its value.
Friday's NFP result is expected to see a result of 187k new jobs, down from 228k in November, yet even a result in the 180s will still be seen as strong given the fact unemployment is currently at historic lows, so any increase in take-up of new jobs above about 100k is viewed as positive.
Average hourly earnings may be more important to the Dollar because relatively subdued earnings growth has kept the inflationary impact of high employment at bay, so changes to earnings are more important now than jobs; these are expected to show a 0.3% rise from 0.2% in the previous month of November.
"We expect payrolls to moderate to a 170k after two consecutive gains north of 200k. An unchanged unemployment rate and a stronger 0.3% m/m wage gain argue for an upbeat report on balance, though the latter should leave earnings stable on a y/y basis," remarks Canadian investment bank TD Securities in relation to the release.
The other main releases in the coming week for the US Dollar are manufacturing and services sector PMIs, which are surveys of key purchasing managers in major sectors of the economy to assess their level of activity.
The US manufacturing PMI for December is out on Tuesday, January 2 at 14.45 GMT.
The Services PMI, meanwhile, is out at the same time on Thursday, January 4.
Data and Events for the Pound
The main release in the coming week for the Pound will be key purchasing manager survey data assessing the health of the three main sectors of Manufacturing, Services, and Construction in December.
These releases are officially known as the PMI (Purchasing Manager Indices) and they are out at 9.30 GMT on Tuesday, December 2 for Manufacturing and Wednesday and Thursday at the same time for Construction and Services respectively.
Manufacturing is expected to have fallen from 58.2 to 58.0, Construction from 53.1 to 52.7 and Services to have remained unchanged at 53.8.
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