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GBP Eyes Fresh High as U.K. Jobless Claims Set to Fall Further

GBP Eyes Fresh High as U.K. Jobless Claims Set to Fall Further

David Song, Strategist

- U.K. Jobless Claims to Decline for Tenth-Consecutive Month

- ILO Unemployment Rate to Hold at 7.8% for Fifth Month

Trading the News: U.K. Jobless Claims Change

U.K. Jobless Claims are projected to contract another 21.0K in August and the ongoing improvement in the labor market is likely to spark fresh monthly highs in the GBPUSD as it raises the scope of seeing a stronger recovery in Britain.

What’s Expected:

Time of release: 09/11/2013 8:30 GMT, 4:30 EDT

Primary Pair Impact: GBPUSD

Expected: -21.0K

Previous: -29.2K

DailyFX Forecast: -10.0K to -25.0K

Why Is This Event Important:

With Bank of England (BoE) policy makers scheduled to testify in front of the U.K. Treasury Committee later this week, a better-than-expected employment report may encourage Governor Mark Carneytoadopt a more neutral tone for monetary policy, while a growing number of central bank officials may highlight a greater risk of seeing above-target price growth for an extended period of time as the economy gets on a firmer footing.

Expectations: Bullish Argument/Scenario

Release

Expected

Actual

NIESR GDP Estimate (AUG)

--

0.9%

Purchasing Manager Index- Services (AUG)

59.7

60.5

Purchasing Manager Index- Manufacturing (AUG)

55.0

57.2

The ongoing pickup in manufacturing and service-based activity may encourage U.K. firms to expand their labor force, and a positive development should bring our topside GBPUSD targets into as the bullish trend continues to take shape.

Risk: Bearish Argument/Scenario

Release

Expected

Actual

Trade Balance (JUL)

-1.700B

-3.085B

Halifax House Price (MoM) (AUG)

0.8%

0.4%

BBA Loans for House Purchases (JUL)

39.4K

37.2K

However, the persistent slack in the real economy may prompt businesses to scale back on hiring, and a dismal print may trigger a near-term correction as it renews speculation for additional monetary support.

How To Trade This Event Risk(Video)

Bullish GBP Trade: Jobless Claims Contracts 21.0K or More

  • Need green, five-minute candle following the print to consider a long GBPUSD trade
  • If reaction favors a buy trade, long GBPUSD with two separate position
  • Set stop at the near-by swing low/reasonable distance from entry; look for at least 1:1 risk-to-reward
  • Move stop to entry on remaining position once initial target is hit, set reasonable limit

Bearish GBP Trade: Unemployment Report Disappoints

  • Need red, five-minute candle to favor a short GBPUSD trade
  • Implement same setup as the bullish British Pound trade, just in reverse.

Potential Price Targets For The Rate Decision

GBPUSD Daily

Forex_GBP_Eyes_Fresh_High_as_U.K._Jobless_Claims_Set_to_Fall_Further_body_ScreenShot092.png, GBP Eyes Fresh High as U.K. Jobless Claims Set to Fall Further
  • Maintains bullish trend dating back to July; reinforced by Relative Strength Index
  • Interim Resistance: June High (1.5750); 100% Fibonacci expansion (1.5780-90)
  • Interim support: 1.5610-20 (78.6% expansion) & 1.5480-90 (61.8% expansion & 200-Day SMA)

Impact that the U.K. Jobless Claims report has had on GBP during the last release

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

JUL 2013

08/14/2013 8:30 GMT

-15.0K

-29.2K

+16

+48

July 2013 U.K. Jobless Claims Change

Forex_GBP_Eyes_Fresh_High_as_U.K._Jobless_Claims_Set_to_Fall_Further_body_ScreenShot085.png, GBP Eyes Fresh High as U.K. Jobless Claims Set to Fall Further

Unemployment claims slipped another 29.2K in July following the 29.4K decline the month prior, while the jobless rate held steady at an annualized 7.8% for the fourth consecutive month. Indeed, the sharp decline propped up the British Pound, with the GBPUSD making a run at the 1.5500 handle, but we saw the sterling consolidate throughout the day as the pair closed at 1.5498.

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com

Follow me on Twitter at @DavidJSong

To be added to David's e-mail distribution list, please follow this link

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