GBP/USD extended its slump in the wake of a firm US employment report Friday. Trendline support at 1.9665 was lost in the immediate aftermath of the data as prices dipped from near 1.9700. Lows in the high 1.9630s were put in place. Just prior to the data, dealers used thin markets to trigger stops above 0.6815 in EUR/GBP.
That cross eased to 0.6805 after the news hit the tape. Carry trades performed well after the employment report as a stable US economy will keep risk appetites on an upward path, helping the pound modestly outperform the EUR. A significant rebound in US bond yields today will cut into the premium Gilts pay over Treasuries when trade reopens on Tuesday in London.
This should help support the greenback and foster the idea that a medium-term top was put I place this week in the 1.9820s. 1.9545 is the near-term downside bear target. The BRC retail sales monitor is due for release first thing Tuesday morning and will set the stage for further sterling losses if it suggests the BOE will not need to hike in May as the market now expects.
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