GBP/USD in a holding pattern ahead of UK labor data, yield spread topped out?

GBP/USD stuck in the narrow range of 1.31-1.3180.
UK labor data likely to show wage growth slowed.
10-year US-UK yield spread may have topped out.

Omkar Godbole FXStreet Contributor

Cable's drop below 1.31 levels yesterday was short-lived, courtesy of the broad-based USD weakness, still, the area around 1.3180 proved a tough nut to crack. The pair fell back to 1.3140 in Asia as investors await the all-important UK labor data.

UK Labor Market Preview: Unemployment is seen steady as wages decelerate

Mario Blascak, European Head at FXStreet, writes, "the market focus will be on wage growth that is seen decelerating in September to 2.1% y/y including bonuses, while wages excluding benefits are seen rising by 2.2% y/y, at the unchanged rate from August."

A weaker-than-expected wage growth numbers could aggravate the problem of negative real wage growth and put more pressure on the Bank of England (BOE) to hike rates. However, it is easier said than done as the BOE is also battling a slowdown in consumption and brexit uncertainty. Thus, traders are likely to offer GBP if the wage growth misses estimates.

Has yield spread topped out?

The above chart shows the US-UK 10-year yield spread has left another lower high at 109.9 basis points (Nov. 8 high) and now looks set to drop further in the GBP-negative manner.

GBP/USD Technical Outlook

FXStreet Chief Analyst Valeria Bednarik writes-

"From a technical point of view, the 4 hours chart shows that the price has broken above the 50% retracement of the latest daily decline and hovers Monday's high, while the RSI indicator accelerated north, now around 58, all of which favors a new leg higher, despite the Momentum holds flat around its 100 level."

Support levels: 1.3130 1.3095 1.3060

Resistance levels: 1.3185 1.3220 1.3260

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

AUD/USD stays weak above 0.6900 after China’s trade data

AUD/USD struggles to capitalize on the previous day’s recovery and stays defensive on the 0.6900 level following the narrowing of trade surplus in China. Increased December Fed rate hike bets allows the US Dollar to pause its decline and weigh on the pair. US CPI data is next of note for the major.

USD/JPY retakes 158.00 on weak Japanese data; focus shifts to US CPI

USD/JPY attracts some dip-buyers and retakes 158.00 in the Asian session on Tuesday as a fall in Japan’s Household Spending offsets hawkish BoJ Summary of Opinions, undermining the Japanese Yen. Moreover, Fed hike bets support the safe-haven US Dollar and the currency pair. The market focus now shifts to the release of the crucial US CPI report.

Gold: $4,150 remains a tough nut to crack as US CPI report looms

Gold pauses recovery near $4,150 as sellers jump in amid pre-US CPI profit-taking. US Dollar licks wounds amid US-Iran optimism and falling Oil prices-led easing inflation concerns. Gold reclaimed key 21-day SMA support on the daily chart as RSI flipped bullish.

XRP and XLM extend losses as bears hold strong

Ripple (XRP) and Stellar (XLM) remain under pressure, trading below $1.093 and around $0.146 respectively on Tuesday as bears maintain control of momentum. In addition, weakening on-chain and derivatives metrics suggest that both XRP and XLM are at risk of a deeper correction in the coming days. CryptoQuant’s summary data shows a bearish outlook for both altcoins.

This weeks’ two big inflation reports will offer perspective

Payrolls on Friday surprised with a big gain, 165,000 new jobs rather than the 65,000 forecast. Also the unemployment rate fell from 4.2% to 4.1% although average hourly earnings are up only 0.4% ($32.75). This weeks’ two big inflation reports will offer perspective. Tomorrow it’s CPI and on Friday, which is a Friday the 13th, it’s PPI.

Gold reclaimed $4,100. Tuesday’s CPI test decides if it holds

Gold (XAU/USD) starts the week on a positive note, reclaiming the $4,100 psychological level as the US Dollar (USD) retreats from its recent highs. The precious metal recovers from Friday's losses, although investors remain cautious ahead of Tuesday's US Consumer Price Index (CPI) report, which could determine the next direction for Bullion.