GBP/USD extends falling wedge breakout towards 1.2400 on strong UK jobs report
- GBP/USD prints three-day uptrend, taking the bids to refresh intraday high.
- UK Claimant Count Change dropped to -56.9K, Unemployment Rate also eased to 3.7%.
- Bullish chart pattern confirmation, upbeat UK data underpin hopes of further upside.
- Anxiety ahead of Fed’s Powell, Brexit announcements test buyers.
GBP/USD justifies firmer prints of the UK’s latest employment data by taking the bids to 1.2365, up for the third consecutive day, during the early Tuesday morning in Europe.
That said, UK Claimant Count Change for April dropped below -38.8K forecast and -46.9K prior readouts to -56.9K. Also favoring the GBP/USD bulls was the easy Unemployment Rate of 3.7%, compared to 3.8% market consensus and prior.
Also read: UK: ILO Unemployment Rate declines to 3.7% in March vs. 3.8% expected
The upbeat UK employment numbers join Bank of England (BOE) Governor Andrew Bailey’s recently hawkish bias to suggest faster rate hikes by the “Old Lady”. However, all this seems to have been priced in and hence the GBP/USD bulls may look towards broad risk catalysts for further directions.
It’s worth noting that the risk-on mood joined the softer US dollar to underpin the cable’s previous run-up. The recovery in the market sentiment could be linked to the covid headlines from China while the US dollar seems to bear the burden of the recently downbeat US data and Fedspeak.
While portraying the mood, stock futures and the US Treasury yields print gains but the US Dollar Index (DXY) remains pressured.
Looking forward, today’s US Retail Sales for April, expected at 0.7% versus 0.5% prior, as well as a speech from Fed Chairman Jerome Powell, will be crucial for the GBP/USD bulls as markets anticipate Powell’s repeated support for 50 bps rate hike. The same, if not heard, could trigger a pullback in the pair prices.
Additionally, UK PM Boris Johnson is also up for releasing details of how the Northern Ireland Protocol (NIP) will be edited for “insurance” purposes, as per the British leader’s latest comments.
Hence, GBP/USD prices have more barriers to the upside even as the immediate reaction to the UK data appears positive.
Technical analysis
GBP/USD confirmed a falling wedge bullish chart pattern with a clear break above 1.2300 on Monday, suggesting further advances towards the monthly high surrounding 1.2640. The recovery moves also gain support from the MACD line’s impending bull cross and nearly oversold RSI.
Alternatively, a downside break of 1.2280 will negate the bullish breakout and can drag the quote back to the latest lows surrounding 1.2155.
Author
Anil Panchal
FXStreet
Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.
