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GBP/USD Daily Forecast – Sterling Little Changed After Employment Data

GBP/USD has been hovering around resistance and UK jobs data has not triggered much of a reaction. Investors will shift their attention to US data as CPI will be released later today.
Jignesh Davda

UK Unemployment Rate Ticks Lower

Jobs data out of the United Kingdom was reported somewhat mixed today. There was a small decline in the unemployment rate from 3.8% to 3.9%. However, unemployment claims reduced to 28 thousand from a prior 38 thousand which was ahead of expectations.

UK data releases are not likely to have a significant impact on the exchange rate or on monetary policy decisions as the Bank of England’s hands are tied with Brexit uncertainty.

This week, talks of a no-confidence vote have been impacting Sterling. GBP/USD has gained in the early week but appears to have stalled out at resistance, at least for now. There is still a lot of uncertainty even surrounding a no-confidence vote. Considering the October 31 deadline is just around the corner, there is not a lot of time.

Even if Boris Johnson loses a no-confidence vote, he may opt to call another election rather than resign. There are still scenarios here in which he can push through a no-deal Brexit if he loses the vote.

I expect that Sterling will continue to be sensitive to ongoing Brexit developments, and in that context, I don’t think today’s US CPI data will have much of an impact on the pair.

Technical Analysis

There is some fairly important resistance in play here, and this is a potential area where the pair can reverse.

On a 4-hour chart, the pair has failed to take out a horizontal level at 1.2087. This level had held the exchange rate higher at the start of the month and confluences with the 20 period moving average on this time frame.

GBPUSD 4-Hour Chart

On the smaller time frames, the pair looks to be potentially forming a bullish flag pattern. However, only an upside break will confirm that. So for that reason, I expect that a break above 1.2067 will offer a strong signal of a continuation.

So far in the early week, the momentum has been to the upside. At the same time, considering the broader downtrend, I think the markets have picked this area to try and establish fresh shorts.

Bottom Line

  • GBP/USD rally has stalled out here at resistance.
  • US CPI data will be released later today.
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