The main events to take note of this week were from the United Kingdom, although the economic news released on Wednesday should been taken in with a little skepticism.
The jobs data was really good. We are not talking about only the actual numbers, but the fact that for the first time in more than three years, the actual earnings growth exceeded the inflation rate. This should be treated as a bullish indicator for the pound. The result? Market participants sold the GBP all over the board.
The reason for the move came not from the jobs data, but from the inflation report released an hour later and with the press conference in which Mark Carney, Governor of the Bank Of England, downplayed both inflation outlook as well as economic growth in the UK. From that moment on there was no way back for the pound.
We would like to point out that the price structure on the GBPUSD pair is forming a falling wedge in the last 2-4 weeks and this could lead to a nasty reversal pattern if traders decide it is time to sell some dollars.
Moving towards the end of the week, we would favor a move on the EURUSD above 1.2500 into the inflation report on Friday. We suspect a nice squeeze on the GBPUSD is also likely to show.
As for the crosses, we still favor the AUDNZD to the upside as well as GBPCAD. The reason for this comes mostly from the different pace/speed the major currencies are moving in, rather than a bullish/bearish specific cross.
In terms of your fundamental analysis, the main event of the week is still ahead of us as the CPI (Consumer Price Index) in Europe is due this Friday. It is about time we see if the deflationary pressures in Europe are real or not. We advise you to expect some volatility on all EUR related pairs.
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Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
