GBP/USD analysis: Pound fails employment test, facing inflation one next

Valeria Bednarik FXStreet

GBP/USD Current price: 1.4293

Lower unemployment was not enough to boost salaries barely above inflation for the first time this year.
GBP/USD sheds near 100 pips, but bullish trend firm in place.

The Pound retreated sharply after reaching a fresh post-Brexit referendum's high against the greenback of 1.4375, as UK employment data failed to impress. According to the official figures, the only positive number was the unemployment rate for the three months to February, down to 4.2% from the previous or the expected 4.3%. The lowest jobless rate, however, was not enough to boost salaries, as wages' growth resulted below expected, with average earning including bonus for the same period up 2.8%, matching the previous month figure, but below the 3.0% expected. Nevertheless, pay growth outpaced inflation in February. The UK, however, will release fresh inflation figures this Wednesday, and if inflation is above expected, will quickly overshadow the modest uptick in salaries. YoY CPI has fallen to 2.7% in February, and is expected to remain at the same level in March. The decline seems so far corrective after the pair advanced roughly 400 pips straight, and technical readings confirm so, as the decline stalled a handful of pips above the 23.6% retracement of its latest bullish run, which in the 4 hours chart converges with a bullish 20 SMA around 1.4280. Technical indicators in the mentioned chart have corrected extreme overbought conditions, with the RSI still heading lower around 58, but the Momentum aiming to bounce after nearing its mid-line.

Support levels: 1.4280 1.4250 1.4220

Resistance levels: 1.4345 1.4390 1.4420

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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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