With Brexit talk sidelined, the British pound will follow this week’s key economic reports, says Matt Weller.
As mentioned here before, the market seems board with the gyrations of Brexit. While squabbling between the different political parties continues apace, it’s now unlikely that we’ll see any near-term progress on Brexit, so traders may now turn their attention back to UK economic data.
Speaking of economic data, tomorrow brings the February jobs report out of the UK. The market is expecting the unemployment rate to hold steady at 3.9%, with wage growth to pick up to 3.5%. On Wednesday, traders will get their first look at March CPI figures, which are expected to show prices rising at 2.0% (from 1.9% in February). We’ll also see March retail sales data on Thursday ahead of the long holiday weekend. While the Bank of England is likely to stay on the sidelines until there is more clarity surrounding Brexit, this week’s data will still be key for traders trying to handicap the central bank’s next move.
Technically speaking, GBP/USD is coiled for a potentially big breakout this week. The pair is reaching the pinnacle of a one-month symmetrical triangle pattern, with an inside candle in progress so far today. This combination of patterns is a textbook sign of low-volatility consolidation and points to a higher velocity breakout sooner rather than later (see chart).
Source: TradingView, FOREX.com
In terms of possible targets, cable bulls may look toward to the mid-March high near 1.3360 if we get a topside breakout, whereas a drop to at least the mid-February trough at 1.2775.
