On Friday the pound/dollar rate dropped to 1.5209 after the publication of strong data on the American labor market. The NFP data exceeded market expectations and increased the probability of the US Fed increasing the rates in June this year.
In contrast with the forecasted 234,000 and the previous year’s value of 329,000, the quantity of new labor capacity in the US in January was 257,000. November’s indicator was reassessed from 353,000 to 423,000, and December’s from 252,000 to 329,000. The overall recalculation amounted to +147,000. The level of unemployment rose by 0.1% to 5.7%. The index for US average hourly earnings showed a 0.5% January increase (forecasted: 0.3%, previous year’s value: -0.2%).
On Mondays I always look at Friday’s movements: over the course of the day, the pound/dollar rate broke from the trend line; looking at an hourly time-frame, it broke the LB balance line and now trades below her at 1.5254. I’m not going to consider the basic scenario of growth higher than 1.5270, but it’s necessary to keep an eye on the euro/pound cross’ movements. If this rate drops sharply like it did on Friday, then the pound is likely to return to 1.5301 on the back of the dollar correction. I’m looking at a drop in the pound to the D3 line (1.5150) by Wednesday.