U.K. firms slow hiring and a surprise climb in the unemployment rate initially drove the pound 80 pips lower to 1.6636 before paring losses back to the 1.6720 area. This release probably pushed back some forecasts on when the BOE will begin tightening.
Eyes on Minutes
With the FOMC minutes to be released at 2pm EST, traders are waiting to see if they see a sign of reduced optimism by the Fed. Recent data leading up to Federal Reserve’s unanimous decision has weakened and any signs of potential dissention may help slow down the pace of tapering this year.
Earlier this week, price formed a bearish butterfly pattern that may help signal a move to target the 50-Day SMA and near-term support currently at the 1.6450 level. If we see a break below that key area, bearish momentum may target the psychological 1.6300 level. Key upside resistance remains around the well-tested 1.6750 area. The next key upside target resides at the 1.7000 level, which represents the top spike that occurred in August 2009.
The trade: Sell GBP/USD at 1.6720 with a stop loss at 1.6770 and a take profit at 1.6470. The Risk/Reward Ratio is 1:5.
Edward J. Moya
WorldWideMarkets Online Trading