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