Sterling Breaks then Settles

Cable Breaks & Settles

Cable broke a triple-top to the highest since mid-2011 but quickly reversed in a potential false breakout. The commodity currencies were the top performers while the yen lagged. Overseas holidays will minimize Asia-Pacific volatility. ASHRAF’s PRE-NFP WEBINAR is on THURSDAY 17:00 EST, 22:00 GMT/London time. See registration link below.

Risk trades surged on the first trading day of 2013 but a round of USD buying stifled the pound and euro. The fiscal cliff deal led to a 2.5% rally in the S&P 500 and that translated to 100 pip gains in the commodity currencies.

The euro made a similar gain in early trading but reversed on a failure to break the December 1.3308 high. On the day, EUR/USD closed slightly lower at 1.3186 – touching both a two-week high and two-week low on the same day.

Cable took out 1.6315, which is a massive level that capped the three most recent rallies. The break sparked a squeeze to 1.6380 but the market wasn’t prepared to move into a new range and the pair dropped back to 1.6250.

The turnaround in cable could be a breather before a second push higher, or a false breakout. The direction isn’t clear yet but whichever way it breaks is likely to be lasting.

Part of the answer will come in the remainder of the week as a number of key US economic indicators are released, including non-farm payrolls . Manufacturing is slowly improving, according to the ISM survey. It climbed to 50.7 compared to 50.3 in November.

ASHRAF’S JOINT WEBINAR on "Currency, Debt & Equity Markets Timing Webinar" with Fari Hamzei and George Cavaligos is on - THURSDAY, JAN 3, 2013 - 16:00 Chicago, 17:00 NY, 22:00 London. LINK TO REGSITER: https://www1.gotomeeting.com/register/498780401  MORE BELOW on the FISCAL CLIFF DEAL.