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GBP/USD Rallies on Strong UK jobs Data

The GBP/USD was consolidating this week after starting with a push to 1.5440. In the $H chart, we can see that it maintained a bullish bias holding above 1.53, and the 50-period SMA in the 4H chart. The 4H RSI also held above 40 after tagging above 70, which reflects maintenance of the bullish momentum in this time-frame. 

GBP/USD 4H Chart 2/18

(click to enlarge)

UK Claimant Count Change (Jan.): -38.6K
Forecast: -25.2K
Previous: -35.8K (revised from -29.7K)
Average Earnings Index 3m/y (Dec.): 2.1%
Forecast: 1.7%
Previous: 1.8%
Unemployment Rate (Jan.): 5.7%
Forecast: 5.8%
Previous: 5.8%

The labor market has improved since the turn of the year. The key data point here is the average earnings index, which reflects wage growth. The 2.1% reading was not great, but it represents a good upwards trend. The BoE has mentioned the lack of wage growth as a barrier to its raising interest rates. While the BoE will not consider raising rates until general inflation also picks up, the jobs data does provide some foundation for that discussion in the future.

We are seeing the GBP/USD push against its high on the week and month at 1.5440. In the daily chart, we can see that it has already put in a price bottom and broken above a falling trendline as well as the 50-day SMA. It seems that the next key resistance will be around 1.56, which is where the 100-day SMA and support/resistance pivot area reside.

GBP/USD Daily Chart 2/18
(click to enlarge)