Coming Up Today (all times GMT)
- USD Unemployment Claims (12:30)
It appears that risk appetite stalled on Wednesday, as the continuation of poor data on the US economy was confirmed again, this time by a lower reading on Core Durable Goods Orders. Furthermore, the Fed remained cautious and warned against fragile economic conditions in its regional economic assessment, the Beige Book. Following a decline on Wall Street, Asian stocks also traded lower on Thursday, increasing concerns that the steam in the recent rally may be running out.
The RBNZ indicated a rise of 25 bps in its benchmark policy rate overnight, from 2.75% to 3%. Despite the increase in the interest rate, the Kiwi was weak as the central bank signaled that further rate hikes may be stalling.
The main focus today will be on the weekly US Unemployment Claims. The consensus by analysts is for a lower number, which might help ease concerns about the recent downward trend on US economic data. However, a potentially more significant economic release will probably be this Friday's US GDP report, with most analysts forecasting a weaker reading. Hence, traders should keep this in mind, and should be cautious in reacting to very small changes on the weekly jobs report today.
As we have been recently pointing out, the pair has been in a very narrow consolidating pattern, and although traders had the chance to profit from playing both sides of the market, they must be very cautious for an outbreak on either direction. The longer the consolidation plays out, the more explosive the outbreak can potentially be, and it would be a wise strategy to go with the trend when this happens. As the 20-hour and 50-hour moving averages have practically converged, there is currently no bias, either to the upside or the downside, and market participants should be waiting to jump on the move as it realizes. Otherwise, active traders should put very tight stops if they want to play the range as it holds.
The cable appears to be mostly unaffected by the mild sell-off on Wall Street on Wednesday and the overall reduction in risk appetite. Instead, it remains in an uptrend, well supported above its 20-hour moving average, and it would require a drop below 1.5565 for the bulls to become worried. Another note of caution might be the fact that the pair has experienced an overextended rally, and there could be some correction on the way, as some technical indicators are registering an overbought signal.