Economic growth in the UK economy all seems to be going smoothly, according to the Bank of England, though with one big exception – Wage growth. Pay rises are still failing to surpass inflation, so even though unemployment is at a 6 year low, the economy might not be ready for a rate rise.
The BoE cut their forecasts for wage growth to just 1.25% in 2014, whereas inflation is running at close to 2%, meaning a net result of people being less well off. A rate rise could potentially slow down the momentum in the jobs market and if unemployment rates were to stop falling so quickly, there would be less upward pressure on wages being demanded. This won’t be a problem forever, but it does mean that a rate rise is not going to happen in 2014.
We continue to see Mr. British pound fall against major counterparts and Invest Diva followers are very close to catch their pips at previously mentioned targets at 1.6650 and 1.65
The main positive we can take is the Bank’s continued optimism over economic growth momentum. They expect that growth in the UK to be 3.5% this year – a more bullish forecast than the government, the IMF and most of the City – and for 2015 to settle down at 3%, which it is hoped will become our long term average.
Stock markets took the news from the BoE, along with news that Japan has suffered its worst economic contraction since 2011 – despite Shinzo Abe’s massive stimulus plan, the economy shrank 1.6% in Q2 – and combined it with poor retail sales numbers from the US to conclude that interest rates were going to be lower for longer and that was cause for celebration indeed.
Europe during the European session was the center of attention with French, German and Eurozone GDP numbers missing forecasts
The single currency AKA Mr. Euro remains on the back foot, but has managed to avoid a sell off, and actually is now trading higher against the US dollar as the pair reacted positive following the import and export price indexes and jobless claims in the US.
The pair is now teasing the Ichimoku cloud but with the pair on a general downtrend, we could see more falls towards our target of 1.3296
Geo-political risks remain as Ukraine is now in a race with Russia to see whose convoy reaches the city of Lugansk first. According to an aide to Petro Poroshenko, the Russian convoy will be stopped at the border. They also said what some others are thinking “maybe the trucks are empty and their drivers are special forces” – which sounds a little too brazen, even for President Putin.
Short-term FX Signals
USD/JPY 4-hour: More up-moves
Invest Diva likes: Long positions above 102.31 with targets @ 102.50 & 102.73 in extension.
If pair goes nuts: Below 102.31 look for further downside with 102.12 & 102.03 as targets.
What’s up on the forex dance floor: The pair is dancing above the Ichimoku cloud with the RSI heading up above the neutrality area.
Supports and resistances:
102.31 pivot point
USD/CHF 4-hour: More down moves
Invest Diva likes: Short positions below 0.9050 with targets at Fibonacci levels at 0.9013 & 0.8983 in extension.
If pair goes nuts: Above 0.9050 look for further upside towards resistance resistance at 0.9111.
What’s up on the forex dance floor: The pair rebounded to the downside towards 38% fibonacci level and broke below the Ichimoku cloud
Supports and resistances:
0.9050 Pivot Point