Cable is likely the big mover over the next session or two with TWO big monetary policy updates right around the corner!
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Fresh Market Headlines & Economic data:
- ADP private-sector job growth surges by 275,000 — but there’s a caveat
- Canadian manufacturing conditions deteriorate for the first time since February 2016
- UK house prices gather a bit more speed in April – Nationwide
- UK manufacturing upturn slows as new export business falls and pace of stockpiling eases
- Low ECB rates to stay, banks should merge: de Guindos
- AIG Manufacturing index 54.8 vs. 51.0 previous
- Oil prices come under pressure after report of swelling US crude stockpiles
Upcoming Potential Catalysts on the Forex Calendar:
- U.S crude oil inventories at 3:30 pm GMT
- Federal Reserve monetary policy statement at 7:00 pm GMT
- FOMC press conference at 7:30 pm GMT
- New Zealand Building Permits at 11:45 pm GMT
- Swiss retail sales at 7:30 am GMT (May 2)
- Swiss manufacturing PMI at 8:30 am GMT (May 2)
- Bank of England monetary policy statement & inflation report at 12:00 pm GMT (May 2)
What to Watch: GBP/USD
Today and tomorrow, we’ll get the latest monetary policy updates from both the Federal Reserve and the Bank of England, making GBP/USD the likely candidate to see the most volatility this week. And from a price action standpoint, Cable is hitting a falling ‘highs’ pattern, which makes this area a make-or-break for both the bulls and the bears.
Whether or not Cable breaks higher or reverses lower to continue the falling ‘highs’ pattern is up to how today’s events play out. The Fed’s statement is a little bit tricky as the market seems to think interest rate cuts are a higher probability than hikes, but some are arguing that a rate hike could happen this year. It’s kind of a toss up on which way the dollar may go today, so all we can do is stay tuned to the event later in the U.S. trading session. For the Bank of England, the expectation is for the Monetary Policy Committee to leave interest rates unchanged but hint at rise in the Summer. If this scenario plays out, it could mean continued bullish moves for Sterling this week.
So for Cable bulls, look for the combination of the Fed hinting at rate cuts and the BOE potentially hiking to go long on GBP/USD. That combination should move GBP/USD well beyond its daily ATR of around 90 pips to make the March highs around 1.3300 – 1.3400 an attainable target in the next week or so.
For the bears, a surprise hawkish rhetoric from the Fed will definitely get the dollar jumping, and if the BOE doesn’t hint on hikes sooner rather than later, then a reversal back to the lower ‘highs’ pattern is a strong possibility. The next support test would come quickly at the 1.3000 major psychological area, but if it can break, 1.2800 is the likely target technical traders will go after.