|S1: $1.3480||R1: $1.3566|
|S2: $1.3350||R2: $1.3594|
|S3: $1.3300||R3: $1.3620|
Weak wage growth data damped down UK rate rise expectations last Thursday. Hawkish comments on Friday by a BOE “dove”, Gertjan Vlieghe sent Sterling soaring to $1.3618. Falling disposable income and London house prices have taken some of the wind from the pounds sails. But any respite may prove to be temporary particularly if the Fed disappoints markets at its own two-day interest rate meeting.
Sentiment was back in the driving seat again on Friday last week as the Cable chart went parabolic. There is little resistance of note beyond Friday’s high (R3) until $1.36864, a low from late Feb 2016. Sterling looks overbought as far as RSI 14 on the daily chart is concerned and it has unwound from here, over shorter time frames, suggesting a gentle drift lower in the absence of fresh upside catalysts.
Having previously had August 2018 in mind, markets now think a UK rate rise could come before the end of 2017. Of course, BOE comments have wrong-footed us before. But HSBC’s admission on Monday that had it been wrong about its $1.20 target and short bias on Cable shows how much the mood has changed among many traders in Sterling.