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UK unemployment preview: What to expect of GBP/USD?

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 20, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Mumbai) - The /www.fxstreet.com/analysis/gbp-usd-forecast/>GBP/USD pair has recovered from the 7-year low of 1.4129 ahead of the UK December unemployment and wage growth data.

    Focus on average earnings

    Sterling fell to 7-year low on Tuesday after BOE’s Carney squashed whatever little hopes of rate hike in 2016 existed. Carney said now is not the time to raise rates and expressed concerns regarding moderating wage growth numbers.

    The data due today is likely to show a sharp slowdown in the average weekly earnings including and excluding bonus. A slowdown in the wage growth could weigh over Sterling. A weaker-than-expected wage growth data could single handedly push cable lower towards 1.40 handle.

    Risk of rise in jobless claims

    The market expects the jobless claims and employment change numbers to show an improvement in the labor market. However, a minor risk of a rise in the jobless claims exists. The slide in oil and other commodities gathered pace in November/December and could have led to job losses in the energy and mining sector.

    The cable could fall to 1.4 levels if the wage growth slows more than expected and the jobless claims rise.

    GBP/USD Technical Levels

    The immediate resistance is seen at 1.4227-1.4227 (May 2010 low and hourly 50-MA), above which the pair could rise to 1.4287-1.4293 (hourly 100-MA & 5-DMA). A better-than-expected UK data could send the pair above 5-DMA. However, the 5-DMA has served as a strong resistance in the last one month. Hence, it would take a surprisingly strong wage growth numbers to ensure the pair is not met with offers at 5-DMA.

    On the other hand, the immediate support is seen at 1.4117 (falling channel support on the 4-hr chart). A dismal UK data could see the pair break below 1.4117 and head towards a major psychological support at 1.40.
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