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Stronger U.K. Job/Wage Growth to Foster GBP/USD Rebound

– U.K. Jobless Claims to Increase for Third Time in 2016.

Average Weekly Earnings ex. Bonus to Climb Annualized 2.4%- Highest Since September.

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Trading the News: U.K. Jobless Claims Change

Even though U.K. Jobless Claims are projected to increase 4.0K in June, another pickup in household earnings may generate a bullish reaction in GBP/USD as it highlights an improved outlook for growth and inflation.

What’s Expected:

DailyFX Calendar

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Why Is This Event Important:

Signs of stronger wage growth may prompt the Bank of England (BoE) to retain its current policy at the next interest-rate decision on August 4 as the central bank runs the risk of overshooting the 2% inflation-target, and Governor Mark Carney may attempt to buy more time even as the U.K. prepares to leave the European Union (EU).

Expectations: Bullish Argument/Scenario

Release

Expected

Actual

Manufacturing Production (YoY) (MAY)

0.4%

1.7%

Index of Services (3Mo3M) (APR)

0.4%

0.5%

Retail Sales ex. Auto Fuel (MoM) (MAY)

0.3%

1.0%

Increased consumption accompanied by the expansion in business outputs may boost job/wage growth in the U.K., and a positive development may generate a near-term rebound in GBP/USD as it encourages the BoE to preserves a wait-and-see approach.

Risk: Bearish Argument/Scenario

Release

Expected

Actual

Rightmove House Prices (MoM) (JUL)

-0.9%

Construction Output s.a. (MoM) (MAY)

-1.2%

-2.1%

Lloyds Business Barometer (JUN)

6

Nevertheless, the spillover effects from ‘Brexit’ may drag on the labor market as it clouds the economic outlook with increased uncertainty, and a series of dismal data prints may drag on the sterling as it fuels bets for additional monetary support.

How To Trade This Event Risk(Video)

Bullish GBP Trade: Job/Wage Growth Picks Up in June

  • Need green, five-minute candle following the print to consider a long GBP/USD trade.
  • If market reaction favors buying sterling, long GBP/USD with two separate position.
  • Set stop at the near-by swing low/reasonable distance from entry; look for at least 1:1 risk-to-reward.
  • Move stop to entry on remaining position once initial target is hit, set reasonable limit.

Bearish GBP Trade: U.K. Labor Market Report Fails to Meet Market Forecast

  • Need red, five-minute candle to favor a short GBP/USD trade.
  • Implement same setup as the bullish British Pound trade, just in reverse.

Potential Price Targets For The Release

GBP/USD Daily

GBP/USD Daily Chart

Chart – Created Using FXCM Marketscope 2.0

  • The string of failed attempts to closes back above 1.3360 (50% expansion) to 1.3370 (78.6% expansion) may invalidate the inverse head-and-shoulders formation carried over from the previous month, with the pair at risk of giving back the rebound from 1.2788 as the pair appears to be carving a near-term high.
  • Key Resistance: 1.4880 (50% retracement) to 1.4930 (38.2% expansion)
  • Key Support: 1.2460 (61.8% expansion) to 1.2500 pivot

Check out the short-term technical levels that matter for GBP/JPY heading into the report!

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Impact that the U.K. Jobless Claims Report has had on GBP during the last release

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

MAY

2016

06/15/2016 08:30 GMT

0.0K

-0.4K

+12

+21

May 2016 U.K. Jobless Claims Change

GBP/USD 5-Minute

GBP/USD Chart

U.K Jobless Claims slipped 0.4K in May after expanding a revised 6.4K the month prior, while the International Labour Organizations gauge for unemployment unexpectedly narrowed to an annualized 5.0% from 5.1% in March. At the same time, Average Weekly Earnings excluding Bonuses unexpectedly climbed an annualized 2.3% in April after expanding a revised 2.2% during the previous month, and the rise in household earnings may boost the fundamental outlook for the U.K. as private-sector consumption remains one of the leading drivers of growth and inflation. The initial market reaction was short-lived, with GBP/USD pulling back from 1.4210 to end the day at 1.4202.

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— Written by David Song, Currency Analyst

To contact David, e-mail [email protected] Follow me on Twitter at @DavidJSong.

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Stronger U.K. Job/Wage Growth to Foster GBP/USD Rebound Reviewed by on . - U.K. Jobless Claims to Increase for Third Time in 2016. - Average Weekly Earnings ex. Bonus to Climb Annualized 2.4%- Highest Since September. For more update - U.K. Jobless Claims to Increase for Third Time in 2016. - Average Weekly Earnings ex. Bonus to Climb Annualized 2.4%- Highest Since September. For more update Rating:
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