GBP/USD - Negative set up ahead of the UK jobs report

Technicals, yield differential favors the downside.
Focus on UK jobs data and May's showdown with Brexit rebels.

Omkar Godbole FXStreet Contributor

UK data released yesterday showed inflation rose to 6-year high in November. Still, the GBP/USD pair dropped to the two-week low of 1.3303 levels.

The daily chart shows a bearish 5-MA and a 10-MA cross. Also, the RSI has dipped below 50.00 levels (bearish territory). The spot failed to take out an ascending trend line (drawn from Nov. 14 low and Nov. 28 low) hurdle despite the uptick in inflation.

Further, the 10Y US-UK yield spread stands at 118 basis points (the highest since mid-August). The USD-favorable yield spread also signals the pair is on the back foot while heading into the UK jobs data release.

Focus on labor data

“The UK labor market is set to deliver another proof of strength in November. While the number of people claiming the unemployment benefits is set to increase by 3.4K in November, the unemployment rate is expected to fall further marking another multi-decade low of 4.2% in three months to October period”, said Mario Blascak, European Chief Analyst at FXStreet.

An upbeat jobs data and wage growth numbers could help the Pound revisit the 10-day MA level of 1.3420. On the other hand, a weaker-than-expected print could push cable down to 1.3245 (50-day MA). Also, PM May's parliamentary showdown with Brexit rebels could influence the pair.

GBP/USD Technical Levels

FXStreet Chief Analyst at Valeria Bednarik writes, "the technical picture is short-term bearish, with the price barely holding above quite a strong dynamic support, the 200 EMA in the 4 hours chart currently at 1.3310. The pair has remained below the 61.8% retracement of its latest bullish run at 1.3345 and below a bearish 20 SMA in the mentioned chart, while indicators hold within negative territory, but with the Momentum heading up and the RSI flat around 38, suggesting the pair may consolidate before the next directional move."

Support levels: 1.3300 1.3260 1.3220

Resistance levels: 1.3345 1.3380 1.3420

Author

Omkar Godbole

FXStreet Contributor

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

GBP/USD bounces off over one-week low; upside potential seems limited

The GBP/USD pair edges higher at the start of a new week, reversing a part of Friday's heavy losses to over a one-week trough. Spot prices, however, lack bullish conviction and trade below mid-1.3500s during the Asian session, warranting caution before confirming that the recent pullback from the highest level since February has run its course.

EUR/USD edges higher to near 1.1600 ahead of German CPI inflation release

The EUR/USD pair gathers strength to around 1.1590 during the early Asian trading hours. The US Dollar edges lower against the Euro despite hawkish remarks from Federal Reserve Chair Kevin Warsh. Traders will take more cues from the preliminary reading of Consumer Price Index inflation data from Germany, which is due later on Monday.

Gold pares intraday losses to sub-$4,400 levels; not out of the woods yet

Gold recovers slightly from sub-$4,400 levels touched during the Asian session, though the upside potential seems limited. A softer US Dollar offers some support to the precious metal and helps trim a part of its intraday losses. Meanwhile, Federal Reserve Chair Kevin Warsh's comments on curbing inflationary pressures on Friday lifted bets for an interest rate hike, which might keep a lid on any meaningful recovery for the non-yielding bullion.

Solana: Strong institutional confidence keeps SOL afloat above $100

Solana price is trading around $100 testing the psychological support level after a 3% decline the previous day. SOL-focused Exchange Traded Funds recorded over $150 million in inflows last week, reflecting strong institutional demand. Solana risks capitulation as price tests the $100 threshold amid easing bullish momentum.

Iran’s IRGC claims it shot down US drone, attacked UAE air base

Iran’s Islamic Revolutionary Guard Corps (IRGC) shot down a US MQ-9 drone over the Strait of Hormuz using air defense missiles, causing it to crash into Gulf waters, Mehr news agency reported on Monday.

Diesel’s record $100 warning: The oil shock hiding in plain sight

The Oil market may look calmer than it did a few months ago, but diesel is sending a very different message. The US diesel crack spread, the premium of ultra-low sulphur diesel futures over WTI, recently surged above $100 per barrel for the first time, reaching an intraday record of just over $102.00.