Speculation lifted the trading pair of the British pound and the US dollar, Cable, to a new five-week peak on Wednesday. This increase was driven both by positive economic signs coming from the UK as well as poor employment figures in the United States. The upward momentum was dramatic, as traders were encouraged by the surprise upward UK November services PMI. This positive data provided the currency with a firmer footing to start with.
That’s right, the ADP announced a surprising and huge plunge in US private payrolls. That news sent the pound soaring even further. This sharp drop increased hopes for a possible rate cut by the Federal Reserve in December. The expectation based on the ensuing economic difficulties of Brexit of a Fed rate cut was the catalyst for the appreciation of sterling. Consequently, Cable rose by nearly 0.8% on the day. It is headed for its biggest one-day advance since the end of June.
In the recent Cable rally it was enough to get it to clear this important resistance level of 1.3295. This level is significant since it represents the Fibonacci 61.8% retracement of the price range from 1.3471 to 1.3009. It coincides almost to the tick with the 55-day moving average (DMA). In addition, Cable broke through the 200-day MA at 1.3319, which is a huge sign of a market sentiment shift.
As Cable neared yet another significant barrier at the 1.3360/70 area, short-term traders were still hopeful. This space marks the bottom of the growing bearish daily Ichimoku cloud. 1380, it corresponds with the Fibonacci 76.4% retracement level and prior tops from Oct 24 and 28. A close above 1.3295 on a daily basis would confirm this as a new bullish Cable signal, adding to the optimism in investors.
Further up, if Cable can keep going, it could face more resistance at 1.3370, 1.3400, 1.3432, and finally 1.3471. Analysts can expect these levels to be watched very carefully as they decide which way to move them further based on the continued evolution of the economic indicators.