Strong UK Jobs Data Helping the GBP/USD Stay Buoyed

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Strong UK Jobs Data Helping the GBP/USD Stay Buoyed

The USD is firming across the board as traders await the 2nd day of Janet Yellen’s testimony in front of a congressional panel. Yesterday (7/15), we saw the USD gain when Yellen navigate questions about monetary policy. Today, we are seeing EUR/USD slide, the USD/JPY spring up, the  AUD/USD dip, but the GBP/USD is staying resilient.

UK Jobs Data: Today, UK’s Office for National Statistics (ONS) reported that in June, there was 36.3K fewer jobless claims. Forecasts called for a 27.1K drop in claims. May’s reading was revised to a drop of 32.8K claims, from the initial reading of a 27.4K drop. June’s Claimant Count Change data is the strongest of the year as the unemployment rate ticked lower to 6.5% in June from a 6.6% reading in May. This was in-line with forecasts and shows the persistent improvement since 2012 as you can see in the bar chart below:

UK Unemployment Rate since 2010:UK unemployment rate June 2014
(source: forexfactory)

Jobs data has been improving so fast, the BoE had to take away the forward guidance based on unemployment rate this year. The prospect of a 2014 rate cut just got better this week. First with the inflation data on Monday, and now the jobs data today.

As dollar crosses give in to USD-strength today, GBP/USD is standing tall. The 4H chart shows that the market was consolidating, but popped up yesterday. That bullish breakout swing stemmed from hotter than expected inflation data for June. The CPI grew 1.9% on an annualized rate in June.

GBP/USd 4H Chart 7/16
GBP/USD 4H Chart 7/16
(click to enlarge)

Here are some observations and assessments on the GBP/USD:
– In the 4H chart we are seeing a bullish market stalling around 1.7180.
– Note that price is around the highs on the year, made yesterday after the inflation report.
– When the RSI is stuck between 40 and 60, it reflects consolidation momentum.
– The RSI has been above 70, and held above 40 for the most part. This reflects an overall bullish momentum still in play in the 4H chart.
As long as price holds north of 1.71, the bullish outlook should remain.
If price falls below 1.7060 however, we are likely to see a price top lead into a period of consolidation/correction in the second half of the month.
– In the bullish continuation scenario, the next resistance will likely be 1.7337, which is 50% retracement of the 2008 dip.
– In the bearish correction scenario, look for support around 1.69. That would make it about 300 pips off the recent highs. The 3 consolidation periods in 2013, and the 1 in late 2014 all have been about 300 pips, and lasted about a month and a half.

To contact the reporter of this story, email Fan Yang at fan@forexminute.com
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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.