Strong UK Jobs Data Propels GBP/USD to Bullish Continuation

0
120
Strong UK Jobs Data Propels GBP/USD to Bullish Continuation

Backdrop: The GBP/USD consolidated after reaching 1.5440 to start the week. We saw an expanded range, followed by a lull in volatility. This was an indecisive market ahead of UK jobs data, but with price holding above 1.53 and the 1H RSI holding above 40 for the most part, cable was maintaining a bullish bias.

GBP/USD 1H Chart 2/18
gbpusd 1h chart 2/18
(click to enlarge)

UK Claimant Count Change (Jan.) -38.6K
Forecast: -25.2K
Previous: -35.8K
Average Earnings Index 3m/y (Dec): 2.1%
Forecast: 1.7%
Previous: 1.8%
uk wage
(click to enlarge; source: forexfactory.com)
UK Unemployment Rate (Jan.): 5.7%
Forecast: 5.8%
Previous: 5.8%
uk unemployment

(click to enlarge; source: forexfactory.com)

Wage Growth is Key:
From the labor market statistics for January and Q4, we can see that the job market has improved at the turn of the year. The key data point here is actually the average earnings reading, which was strong in Q4. When the BoE was considering a rate hike, it was the lack of wage growth that kept it from pulling the trigger, among other things. Wage growth was continually mentioned as a key barrier, so if we start to see strong wage growth, the next bullish economic cycle should anchor the BoE back into rate hike considerations. The 2.1% reading is not that impressive, but the trend has been picking up.

GBP/USD Reaction:
The market liked this data set for the pound. The 1H chart above shows the GBP/USD pop up above a tight consolidation, testing the 1.5440 high. It looks poised to break it during the 2/18 US session, though there is risk of an intra-session pullback toward 1.5380-1.54.

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

From the daily chart, we can see that price has indeed bottomed and broken above a falling trendline that’s kept cable bearish since the 2014 high at 1.7190. While the medium-term outlook might still be sideways or bearish, the short-term outlook is bullish, with the 1.56 level in sight. This is a support/resistance pivot area and where the 100-day SMA resides.

Previous Post by Author: GBP/JPY in a Bullish Continuation Breakout

SHARE
Previous articleCryptocurrency Trading News: Bitcoin Hinting Pullback; Litecoin Stable
Next articleEUR/USD – Stalking the Twist and Turns
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.