GBP/USD analysis: inflation ok, but what about employment?

Valeria Bednarik FXStreet

GBP/USD Current price: 1.3270

The GBP/USD trades at fresh 2017 highs by the end of the US session, not far from the early high set at 1.3287. The Pound was supported early Asia by news indicating that the EU withdrawal bill passed smoothly through the House of Commons, with discussions on possible amendments set for next October. For now, however, PM May cached a breath. The pair soared after the release of UK inflation figures for August, as the CPI rebounded to 2.9% yearly basis, from 2.6% in July. For the month, inflation increased by 0.6% from previous -0.1% whilst the core yearly inflation resulted at 2.7%. Inflation at factory gates was also higher than forecasted, up for the first time in six months, with output prices up by 3.4% in the year to August. Speculation that the BOE will have no choice but to raise rates with growing inflation and wages lagging, was behind Pound's rally. The UK will release its latest employment figures this Wednesday, and wages will determinate whether current upward momentum would extend or not. The pair pulled back to 1.3227 early US session, but quickly regained the upside, heading into the Asian opening near the mentioned yearly high. Technically, the pair remains biased higher short term, given that in the 4 hours chart the price met buying interest around a sharply bullish 20 SMA, whilst technical indicators are currently aiming to regain the upside after correcting early overbought conditions. An extension beyond the daily high should expose the 1.3347 level, September 2016 high, while steady gains beyond this last should lead to a sustained rally up to 1.3500.

Support levels: 1.3225 1.3180 1.3140

Resistance levels: 1.3290 1.3345 1.3395

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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