From the UK, polls over the weekend seem too close to call and show that Thursday’s independence vote will is likely give us a week of volatile UK asset and currency prices. Major firms will probably continue to signal their intent to move operations south of the border if the vote does go Alex Salmond’s way; the first minister, who described the independence referendum as “once in a lifetime opportunity for Scotland”
While the Scottish Independence Vote is probably the most important deal of the week for Mr. British Pound, there are a bunch of other event risks that could also create volatility and therefore trading opportunity for short-term forex traders.
1. U.K. Consumer Price Index (Sept. 16, Tues 9:30 am GMT)
AKA CPI is the change in the price of goods and services purchased by consumers. This is considered the UK’s most important inflation data because it’s used as the central bank’s inflation target. The headline figure already slipped from 1.9% to 1.6% in July and it is slated to print another drop to 1.5% for August, far below the Bank of England’s 2% annual inflation target.
Another decline in core inflation might lead to more weakness in Mr. British Pound against his counterparts, as this would suggest that the BOE probably shouldn’t start tightening monetary policy just yet.
2. U.K. Average Earnings Index (Sept. 17, Wed 9:30 am GMT)
Change in the price businesses and the government pay for labor, including bonuses. This is also a leading indicator of consumer inflation – when businesses pay more for labor the higher costs are usually passed on to the consumer. So a better than expected reading would be good for Mr. British Pound. However, in the past few months we’ve had lower than expected readings which could repeat this month as well.
3. U.K. Claimant Count Change (Sept. 17, Wed 9:30 am GMT)
Change in the number of people claiming unemployment; For the month of August, the number of claimants is expected to drop by 29.7K, a slightly slower pace of unemployment reduction compared to July’s 33.6K decline.
4. U.K. Jobs Data (Sept. 17, Wed 9:30 am GMT)
The UK jobless rate is projected to improve from 6.4% to 6.3% in August, which might revive rate hike expectations once more. Analysts are expecting to see a 0.5% rebound in average earnings, which might boost the pound this time.
5. BOE Monetary Policy Committee Meeting Minutes (Sept 17, Wed 9:30 am GMT)
The pound’s reaction to the U.K. jobs release might be short-lived though, as the BOE is also set to print the minutes of its latest monetary policy meeting at the same time.
Although the U.K. economy printed a few disappointing reports after the BOE’s July meeting, market watchers are still expecting to see at least two votes supporting a rate hike. Any additional rate hike votes could be even more bullish for Mr. British pound.
6. U.K. Retail Sales (Sept 18, Thurs 9:30 am GMT)
Normally a bigger deal than what it would be this Thursday, Pound traders would see a bit of a volatility ahead of Scottish Independence Vote when the change in the total value of inflation is announced in the morning. Consumer spending is expected to pick up pace for the month, with a projected 0.4% increase in retail sales.
Retail sales in the U.K. has been down since May when the economy saw a 0.5% decline in spending, followed by a couple of months of mere 0.1% uplifts. This has mostly been blamed on seasonal factors and the fact that wages and price levels have been falling. A stronger than expected recovery in spending could lead to a rise in Mr. British pound, while another meh retail sales figure could change the scenario.
7. Scottish Independence Vote (Sept 18, Thurs)
As mentioned above, among the hot economic events lined up in the U.K. this week, the Scottish referendum is perhaps the most anticipated one. The outcome could have long-term effects on political and economic stability.
How to Trade British Pound this Week
1- Long term traders look for a rebound/ continuation signal at the end of the week. If you already have a position, loosen up your stop and limit levels so you won’t get kicked out on volatilities
2- Short term traders: Be on top of the news and trade the volatility while keeping an eye on technical analysis.
Intraday Forex Technical Levels
GBP/USD 4-hour: Key resistance Level at 1.606
Invest Diva likes: Long positions above 1.6155 with targets at 1.6236 and 1.6326 in extension..
If pair goes nuts: Below 1.6155 look for further downside with 1.606 and 1.5986 in extension
What’s up on the forex dance floor: After rebounding from a key resistance level te pair has just entered the Ichimoku cloud and testing the upper band of a falling wedge. A break above the wedge reversal pattern could open doors for more gains towards the 23% Fibonacci level.
Supports and resistances:
1.6155 pivot point
EUR/USD 4-hour: Consolidating.
Invest Diva Likes: Short positions below 1.2947 with targets at 1.2874 and 1.281 in extension.
If Pair Goes Nuts: Above 1.2947 look for further upside towards 1.3020 and 1.3142.
What’s up on the Forex Dance Floor: The pair is on an overall downtrend but is now consolidating between the levels at 1.2947 and 1.2874 below the Ichimoku’s cloud. The RSI remains below the neutrality area.
Supports and Resistances
1.2947 Pivot Point
USD/JPY 4-hour: Testing the resistance level at 107.36.
Invest Diva Likes: Long positions above 107.36 with targets at 107.50 and 108 in extension.
If Pair Goes Nuts: Below 106.9 look for further downside towards 106.72 and 106.34.
What’s up on the Forex Dance Floor: The pair is on an overall uptrend above the Ichimoku’s cloud. IT is currently teasing a previous support from back in November 2007 now turned into resistance at 107.36 with the RSI slightly below overbought zone. Market sentiment of one of the largest international brokers shows that 62% of traders are short the pair. Using this sentiment index as a contrarian indicator, the combination of the technicals and current sentiment gives a further bullish bias.
Supports and Resistances
106.9 Pivot point
AUD/USD 4-hour: Rebounding after reaching target.
Invest Diva Likes: Long positions above 0.8990 with targets at 0.9083 and 0.9141 in extension.
If Pair Goes Nuts: Below 0.8990 look for further downside towards 0.8950 and 0.8895.
What’s up on the Forex Dance Floor: The pair moved down and reached our previous targets a at 0.8990 but now is rebounding and moving towards the 23% Fibonacci level. The RSI is heading up from oversold zone.
Supports and Resistances
0.8990 Pivot point