GBP/USD Eyes $1.18 as BoE Rate Hike Bets Get Hawkish

It was another busy start to the day for the Pound. UK employment and average earnings figures for July and claimant count numbers for August drew interest.

The stats were Pound positive, supporting a hawkish Bank of England rate hike next Thursday.

According to the ONS, the unemployment rate fell from 3.8% to 3.6% (May to July 2022), the lowest May to July rate since 1974.

Significantly, average earnings ex-bonus increased 5.2%, up from 4.7% in June. Average earnings +bonus was up 5.5% versus 5.2% in June. Economists forecast 5.0% and 5.4%, respectively. With the BoE focused on wage growth, today’s figures provided the case for a more hawkish policy move.

In response to the labor market numbers, the probability of a 75%-basis point rate hike rose to 75%. The shift in sentiment towards a more hawkish policy move delivered strong Pound support.

GBP/USD Price Action

At the time of writing, the Pound was up 0.21% to $1.17038.

In response to today’s labor market numbers, the Pound rose to a day high of $1.17283 before easing back. The First Major Resistance Level (R1) at $1.1726 capped the upside.

Technical Indicators

The Pound needs to avoid the $1.1663 pivot to retarget the First Major Resistance Level (R1) at $1.1726 and the morning high of $1.17283. Following today’s stats, a pickup in market risk sentiment would support a run at the Second Major Resistance Level (R2) at $1.1773 and $1.18.

However, US CPI numbers will need to be softer for a GBP/USD breakout from $1.1750.The Third Major Resistance Level (R3) sits at $1.1883.

A fall through the pivot would see the Pound test the First Major Support Level (S1) at $1.1616 and support at $1.1600. However, barring a risk aversion-fueled sell-off, the GBP/USD pair should avoid sub-$1.16 and the Second Major Support Level (S2) at $1.1553.

The Third Major Support Level (S3) sits at $1.1443.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The GBP/USD sits above the 100-day EMA, currently at $1.16761.

The 50-day closed in on the 100-day EMA, with the 100-day EMA narrowing to the 200-day EMA, delivering bullish signals. A GBP/USD move through R2 ($1.1773) would give the bulls a run at $1.18 and the 200-day EMA ($1.18044).

However, a GBP/USD slide through the 100-day EMA ($1.16761) and the pivot ($1.1663) would give the bears a look at the Major Support Levels.

EUR/USD Price Action

At the time of writing, the EUR was up 0.14% to $1.01357.

A mixed start to the day saw the EUR/USD fall to an early low of $1.01150 before rising to a high of $1.01548.

Technical Indicators

The EUR/USD needs to avoid the $1.0126 pivot to target the First Major Resistance Level (R1) at $1.0193.

Finalized member state inflation figures and ZEW Economic Sentiment figures for Germany and the Eurozone will influence.

Improved sentiment towards the German and Eurozone economies would support a run at the Second Major Resistance Level (R2) at $1.0264. The Third Major Resistance Level (R3) sits at $1.0402.

A fall through the pivot would see the EUR/USD test the First Major Support Level (S1) at $1.0055.

However, barring a market flight to safety, the EUR/USD pair should avoid the Second Major Support Level (S2) at $0.9988. The Third Major Support Level (S3) sits at $0.9850.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The EUR/USD sits above the 200-day EMA, currently at $1.00861. The 50-day EMA converged on the 100-day EMA, with the 100-day EMA narrowing to the 200-day EMA to deliver bullish signals.

A bullish cross of the 50-day EMA through the 100-day EMA would support a run at $1.020. However, a fall through S1 ($1.0055) would bring the 100-day ($1.00327) and the 50-day ($1.00310) EMAs into play.

The US Session

US consumer inflation numbers will draw interest. We expect dollar sensitivity to the CPI numbers. With the FOMC in its September blackout period (September 10-22), the DXY will be data-dependent through the US session.