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11/06/2014: Trading outlook ahead of the US session

The story of the morning;s trading has been the jump higher in Sterling on the back of the better than expected UK unemployment data. The ILO 3 month unemployment rate in the UK fell to 6.6% in the three months to April which was lower than the 6.7% expected by the market. The number of jobless claims also fell by 27,400 which was again better than the 25,000 decline forecast. There is little data for US traders to be watching this afternoon so they will be reacting to the UK unemployment data.

Sterling has jumped higher on the back of the announcement, pulling GBP/USD into the resistance band $1.6780/$1.6800. However perhaps what is not being given enough attention is that annual wage growth only grew by 0.7% in the three months to April (compared to +1.7% in January to March period). This is not supportive of rate hike pressure. Therefore I believe that this gives a chance to sell as I see pressure on the $1.6691 support in due course over the near to medium term.

GBPUSD   11062014

In other forex majors, EUR/USD has once again come under more pressure as the mornign has gone on. The rate continues to eye a test of the low hit during the ECB press conference at $1.3502, but the key support is at $1.3475 near term.

There has also been a strengthening of the Japanese yen which has dragged Dollar/Yen below the reaction low at 102.10. The pivot level at 102.00 is now the immediate test and a break and hold below it now being a bearish near term signal.

Gold remains fairly solid amid the profit-taking/selling pressure on equities today. There has been little movement so far, but with support continuing to be formed above $1257.50 the near term recovery continues.

The other move has been a correction in the European indices. This follows a cautious session in both Wall Street and Asian trading. The S&P 500 remains overbought and immediate upside potential looks rather limited. S&P 500 index futures are also calling for a 5 point decline at the open. The profit warning at Lufthansa has not helped the DAX this morning with it just under a percent lower. This merely looks like a near term corrective move on the DAX so far, with its 8 week uptrend intact (the support of the uptrend currently comes) in around 9880. The FTSE 100 has once again failed near the key resistance once more and also broken below yesterday’s low at 6836 which is a weak sign.

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