GBP/USD Forecast: Sterling near support base ahead of UK wage growth data
|- The UK wages excluding bonuses are expected to rise 2.9% y/y in three months to March while wages including bonuses are seen decelerating to 2.6% y/y.
- The GBP/USD is well supported at 1.3460-1.3500 support zone.
- Technically, the short-term oscillators are exhausted on the downside.
The GBP/USD is trading little changed on the downside amid 1.3500s on Tuesday ahead of the UK employment report due, with the key wage growth data seen setting the direction for the currency pair.
The UK wages excluding bonuses are expected to rise 2.9% y/y and decelerate to 2.7% y/y including bonuses in three months to March after both indicators rose 2.8% y/y in three months to February. At the same time, the UK unemployment rate is expected to dwell at 1975 low of 4.2% in April with the claimant count rising 7.8K in April after 11.6K in March.
The UK wage growth data smashed GBP/USD lower last month with 0.1% miss on the expected 2.9% increase with GBP/USD falling from a 22-month high of 1.4377 from April 17 to 1.3460 after the last week’s Bank of England inflation report. The Bank of England turned dovish in May saying more patience is needed before hiking rates as the UK economy is surrounded by the bulk of uncertainties including Brexit and the economic slowdown with the UK GDP rising 0.1% Q/Q during the first quarter only.
The GBP/USD is now sitting near strong support zone, or the base, of around 1.3460-1.3600, unable to move substantially either direction from here. The GBP/USD recovered from 1.3460 lows at the beginning of this week towards 1.3600 level, but the rise in the US benchmark Treasury yields towards 3.00% supported the US Dollar to recover to mid-1.3500 area.
Technically, the GBP/USD is well supported at the support zone corresponding to 1.3560 or a 50% Fibonacci retracement of the move from 1.2770 to 1.4377. With the wage growth surprising on the upside, the GBP/USD is expected to be boosted heading towards 1.3600 first before rising towards 1.3750 resistance zone. The technical oscillators like Slow Stochastics are already in the oversold condition while the Momentum and the Relative Strength Index are pointing downwards in the middle of the range with potential on either side of the price move. On the downside, the GBP/USD is likely to face some support at 1.3500 first before targeting cyclical low of 1.3460. Only the break below opens the way towards a lower level of 1.3380 representing December 2017 low and 61.8% Fibonacci retracement of the above-mentioned trend higher.
GBP/USD 1-hour chart
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