GBP/USD Daily Price Forecast – GBP/USD Erases Early Gains Post Disappointing UK Macro Data

Pound pares gains post dovish UK data and investors focus on Brexit talks which are to resume later this week for clues of future of the pair’s momentum in long term.
Colin First
GBPUSD Tuesday
GBPUSD Tuesday

GBPUSD saw a mixed reaction towards the latest UK jobs reports. The pair had initially rose to session highs of 1.28269 as the unemployment rate fell 0.2 ppts to 4% (Lowest since 1975), which is below the Bank of England’s most recent NAIRU forecast of 4.25%. However, the wage components yet again disappoint the BOE with average weekly earnings at 2.4%, missing expectations of 2.5%. The employment change rose a modest 42k, although failed to reach estimates of 98k. Consequently, GBPUSD erased early gains moving very near to yesterday’s close and as of writing this article the pair is trading near flat at 1.2782 up 0.09% on the day. Despite the ongoing corrective upside, GBP remains under pressure on increasing buying interest around the greenback and unabated uncertainty surrounding the Brexit negotiations.

Investors Focus On UK-EU Brexit Talks Set To Resume This Thursday Before Placing Long Term Bets

The focus for GBP investors now moves towards Brexit Negotiations which is the next big thing among key first tier data scheduled to release this week. The focus for GBP on Brexit has been evidenced by the improvement in data since mid-June, reflected in the UK Data Surprise Index. However, GBP has continued to soften as markets pay on to the latest developments surrounding Brexit. Consequently, as Brexit talks resume on Thursday, this may indeed dictate sentiment for the Pound. Elsewhere, reports from UK press this morning noted that Tory Brexiteers are said to be planning to challenge PM May but publishing their own blueprint favoring a hard Brexit, which will be published next month. This is also expected to have the backing of 60-80 Conservative MPs.

Looking at pair from technical perspective, downward momentum has eased and the risk of a sustained decline for today is low. GBP has likely moved into a consolidation phase and is expected to trade sideways for now, expected to be between 1.2730 and 1.2825. Stable support which was earlier found around 1.2775 was breached during multi-day decline and hit a low of 1.2722 last Friday. The next level of key support can be found around 1.2675 in case of minor downward correction as trading session moves forward this week. On the flip side, with the current decline is in oversold territory, there is no sign of stabilization just yet and further weakness still seems likely. On the upside move stable resistance is found around at 1.2880 followed by 1.2940 respectively.

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