FxWirePro: Sterling has broken key resistance, a rise towards 1.38 likely

As U.S. non-farm payroll surprised to the downside, the pound sterling has broken a key resistance against the dollar. In August the U.S. economy only added only 151,000 jobs and average hourly earnings grew only 0.1 percent compared to 0.3 percent last month. This puts considerable doubts over the U.S. labor market and that might just prompt Fed policymakers to rethink their stance and refrain from a hike in September to the very least.

The sterling, on the other hand, is trying to ride the economic surprises from the United Kingdom. Both the manufacturing PMI and the construction PMI have pointed to a rebound in the economy in August, after a sudden dip in July after the referendum in June. This should lead to the returning of some of the funds which have been withdrawn from the UK after the unexpected outcome of the referendum and the Bank of England (BoE) may stay away from further easing.

Technically speaking, rising this optimism, the sterling has broken above a key resistance line and now likely to move higher against the dollar. We expect the pound to reach around 1.38 against the dollar.