UK employment report preview: What to expect of GBP/USD?

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Feb 17, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    The GBP/USD pair breached rising trend line support in early Europe and fell to 1.4244 levels before recovering slightly to trade around 1.4265 ahead of the release of the UK monthly labor data and wage growth figures.

    Wage growth slowdown gives BOE scope to stay dovish

    The data is expected to show wage growth slowed to 1.8% y/y (excluding bonus) and to 1.9% y/y (including bonus). Subdued wage growth and receding inflationary pressures gives enough scope to Bank of England to respond to risks arising out of Brexit.

    The interest rate markets in the UK are already pointing to a slim chance of a rate cut in the next six months or so. Hence, a weaker-than-expected number could push the pair to fresh daily lows. A drop in the unemployment rate could ensure the losses are somewhat restricted.

    Cable could see a sharp recovery only if the wage growth rises faster than the previous month’s reading. Given the pair has dropped ahead of the data, a slowdown in wage growth may have been priced-in. Hence, fresh lows could be seen only in case of a weaker-than-expected number.

    GBP/USD Technical Levels

    The immediate resistance is seen at 1.43, above which the spot could target 1.4351 (23.6% of 1.5230-1.4079). A break higher may see the pair test offers around 1.4374 (50% of 1.4079-1.4668). On the other hand, a break below 1.4244 (daily low) could push the spot lower to 1.4218 (76.4% of 1.4079-1.4668), under which the losses could be extended to 1.4173 (Jan 26 low).
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