Pound accelerated higher in early European trading, following narrow consolidation in Asia and extends strong rally from the previous day when the pair gained 0.6%. Optimistic news about Brexit as EU negotiators said that divorce deal is very close inflated pound for bounce from dangerous zone. Double-bottom was left near strong supports at 1.2900 zone, generating positive signals along with Thursday’s bullish outside day and close above thick daily cloud. Renewed strength cracked initial barrier at 1.3059 (falling 10SMA) and pressures nearby pivots at 1.3066 (Fibo 38.2% of 1.3297/1.2922) and 1.3082 (20SMA), break of which is needed for next bullish signal. Improved sentiment does not have full support from technical studies which are in mixed setup on daily chart (momentum continues to trend lower / slow stochastic heads north after reversal from oversold territory, while MA’s are in mixed mode) and do not provide clear signal for now. Today’s close above 20SMA would sideline downside risk, with extension and close above 1.3155 (Fibo 61.8% of 1.3297/1.2922) needed to confirm reversal. Bearish scenario requires return and close below 55SMA (1.2985) to shift near-term focus lower again and expose key supports at 1.2922/00 zone (double bottom of 03/04 Oct, daily cloud base / Fibo 61.8% of 1.2661/1.3297 ascend). US jobs report is in focus and could be the key driver today. US labor sector is expected to further expand in September, with forecast for 185K new jobs added in Sep, unemployment expected to fall to 18-year low at 3.8%, but earnings are expected tick lower (0.3% f/c in Sep vs 0.4% previous month). However, overall picture of labor sector remains positive and sufficient to keep inflation around 2% target, which is expected to keep Fed on track for further rate hikes. Overall better than expected figures today would boost dollar and turn pound’s near-term outlook negative, negative, while downbeat numbers from US jobs sector would spark stronger recovery.
Res: 1.3059, 1.3066, 1.3082, 1.3110
Sup: 1.3012, 1.3000, 1.2980, 1.2922
