26/11/2014: Cable breaking out, but watch out for the US housing data

Perhaps surprisingly, there has been a little bit of action on the forex markets this morning. The re-positioning has come ahead of a raft of US data this afternoon which will pack in what should have been probably two or three days worth of data into one hour and a half period due to the Thanksgiving holiday in the US. However, don’t be to sure that the market will react with any great volatility.

Whilst most forex pairs have remained stable through the morning, Cable has been a bit more active. The move has come about following the second reading of UK GDP which was bang in line with expectations (+0.7% for the quarter, +3.0% for the year). The initial slide has subsequently turned around and the range highs around $1.5736 are currently being tested. This will be an interesting challenge, as the hourly RSI momentum is now above 70 having previous suggested fot the past two weeks that Cable has been a range trade. Now we are beginning to see Cable to trade above the $1.5736 resistance on a consistent basis AND have the hourly RSI moving above 70, this validates the near term breakout. The support now becomes $1.5720/$1.5740, whilst there is a theoretical upside target of $1.5880 (be careful as bear market rally targets will often struggle to meet their targets before the sellers return).

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Aside from this, major forex pairs and gold have largely been settled through the morning. This could be set to change this afternoon as the market looks towards several US economic releases, however it may be only the housing data that could cause traders to sit up and pay attention ahead of the Thanksgiving holiday.

The Weekly Jobless Claims have remained fairly settled below 300,000 in recent weeks and once more a figure around the 290,000 level would not create too much of a stir (288,000 is expected). The Durable Goods orders are also set to be released at 13:30GMT and again a fairly muted reaction could meet a +0.5% expected number. Again, the revised Michigan Sentiment is unlikely to have too much impact at 14:55GMT, with a 90.0 consensus only a slight improvement on the 89.4 flash reading.

This only really leaves the housing data to be the driver his afternoon. The housing data this month has tended to be fairly positive so far. The NAHB Housing Market Index, Building Permits, Existing Home Sales and Case-Shiller have all been better than expected this month. This leaves us with the New Home Sales (+1.0% and 472k expected) and Pending Home Sales (+0.5% expected) this afternoon (at 15:00GMT). Further strong housing numbers would be a lift for the dollar and certainly could help to drag Cable back lower again.

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