Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.3400.
- Add a stop-loss at 1.3650.
- Timeline:1-2 days.
Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.3650.
- Add a stop-loss at 1.3400.
The GBP/USD pair retreated after the UK published a weak jobs report, which raised the possibility of more Bank of England interest rate cuts this year. It dropped to 1.3556, down substantially from the year-to-date high of 1.3870 as investors focus on the upcoming inflation report.
Top Regulated Brokers
UK Unemployment Rate Rises
The GBP/USD pair dropped as a report by the Office of National Statistics (ONS) showed that the labor market weakened in December last year. The unemployment rate rose to 5.2% from the previous 5.1%. It has now moved to its highest level in nearly 5 years
The report showed that the number of people on payrolls in the three months to December dropped by 130,000. The average earnings grew by 4.2% in December.
These numbers mean that the labor market is weakening, with analysts expecting some normalization later this year.
The next key catalyst for the GBP/USD pair will be the upcoming UK inflation report, which is expected to remain at an elevated level.
Economists expect the report to show that the headline Consumer Price Index dropped from 3.4% in December to 3% in January. Core inflation, which excludes the volatile food and energy prices, is expected to come in at 3.1% from the previous 3.2%. The retail price index is expected to drop from 4.2% to 3.9%.
This slowdown is expected to continue in the coming months, a move that will make it easier for the Bank of England to cut interest rates.
The GBP/USD pair reacted to a statement by Austan Goolsbee, a top Federal Reserve official, who said that he supported more interest rate cuts this year if inflation continues falling towards the target of 2.0%. The Fed will publish minutes of the last monetary policy meeting later today.
GBP/USD Technical Analysis
The daily timeframe chart shows that the GBP/USD pair has pulled back in the past few weeks, moving from a high of 1.3875 to the current 1.3557. It has moved slightly below the lower side of the ascending trendline.
The pair’s Supertrend indicator remains green, a sign that the uptrend is still intact. It also remains above the 50-day Exponential Moving Average.
On the other hand, the Relative Strength Index has moved below 50, while the two lines of the Percentage Price Oscillator (PPO) have formed a bearish crossover and are nearing the zero line.
Therefore, the most likely scenario is where the pair continues falling, with the next key target being at 1.3400