UK Breaking News: Wage Growth Keeps Pound Bid
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POUND STERLING ANALYSIS & TALKING POINTS
- Employment change and unemployment misses disregarded by markets.
- Extreme overbought levels for cable could lead to fading GBP rally?
GBPUSD FUNDAMENTAL BACKDROP
The British pound unusually rallied on a missed employment change figure alongside an increase in unemployment (see economic calendar below) due to yesterday’s statement by the Bank of England (BoE) Governor Andrew Bailey. The statement cited wages and prices are rising too quickly and the MPC is squarely focused on wage, inflation and price data respectively.
UK ECONOMIC CALENDAR (GMT +02:00)
Source: DailyFX Economic Calendar
Some report highlights include:
- Fresh 2022 low for employment change figure.
- Unemployment rate hits 4% for the first time since late 2021.
- Highest average earnings both including and excluding bonuses for 2023.
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GBP/USD DAILY CHART
Chart prepared by Warren Venketas, IG
Price action on the daily cable chart above now leaves the 1.2900 psychological resistance handle exposed which has not been tested prior to April 2022. That being said, the Relative Strength Index (RSI) exhibits bearish/negative divergence whereby prices and RSI readings move in opposing directions, possibly eluding to subsequent downside to come.
Key resistance levels:
Key support levels:
- 1.2680/Trendline support
BULLISH IG CLIENT SENTIMENT
IG Client Sentiment Data (IGCS) shows retail traders are currently net SHORT on GBP/USD with 68% of traders holding short positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment resulting in a short-term upside disposition.
Contact and followWarrenon Twitter:@WVenketas
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.