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Upbeat U.K. Job/Wage Growth Report to Curb GBP/USD Losses

U.K Employment to Increase Another 120K in May.

Average Hourly Earnings ex. Bonus to Increase for First Time Since November.

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Trading the News: U.K. Employment Change

U.K. Jobless Claims

A 120K expansion in U.K. Employment paired with a pickup in core household wages may spark a near-term rebound in GBP/USD as it puts pressure on the Bank of England (BoE) to start normalizing monetary policy.

Why Is This Event Important:

There appears to be a growing rift within in the BoE as Governor Mark Carney adopts a more hawkish tone and now warns ‘some removal of monetary stimulus is likely to become necessary.’ Signs of stronger job/wage growth may encourage the central bank to start normalizing monetary policy, but the majority of the Monetary Policy Committee (MPC) may merely try to buy more time at the next meeting on August 3 as officials argue ‘the projections that the Committee published in May showed that the economy was expected to operate with a small degree of spare capacity for most of the three-year forecast period, justifying the tolerance of some degree of above-target inflation.’

Impact that the U.K. Employment report has had on GBP/USD during the previous print

Period Data Released Estimate Actual Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

MAY

2017

06/14/2017 08:30:00 GMT

125K

109K

-17

-2

May 2017 U.K. Employment Change

GBP/USD 5-Minute

GBP/USD Chart

U.K. Employment increased 109K in April, while Jobless Claims climbed another 7.3K in May after increasing a revised 22.0K during the previous month. At the same time, Average Hourly Earnings excluding Bonuses slipped to an annualized 1.7% from a revised 1.8% in March to mark the slowest pace of growth since January 2015. The British Pound showed a lackluster reaction to the batch of mixed data prints, with GBP/USD largely consolidating throughout the day as the pair closed at 1.2751.

How To Trade This Event Risk(Video)

Bullish GBP Trade: U.K. Job & Wage Growth Picks Up

  • Need a green, five-minute candle subsequent to the report to consider a long GBP/USD trade.
  • If market reaction favors a bullish British Pound trade, buy GBP/USD with two separate lots.
  • Set stop at the near-by swing low/reasonable distance from entry; look for at least 1:1 risk-to-reward.
  • Move stop to breakeven on remaining position once initial target is met, set reasonable limit.

Bearish GBP Trade: Employment Report Fails to Meet Market Forecasts

  • Need a red, five-minute GBP/USD candle to favor a bearish British Pound trade.
  • Carry out the same setup as the bullish Sterling trade, just in the opposite direction.

Potential Price Targets For The Release

GBP/USD Daily

GBP/USD Daily Chart

Chart – Created Using Trading View

  • Failure to test the May-high (1.3048) keeps the near-term bias for GBP/USD tilted to the downside especially as it carves a bearish outside-day (engulfing), while the Relative Strength Index (RSI) continues to come off of trendline resistance.
  • May see the rebound from the June-low (1.2589) continue to unravel as it struggles to hold above the 1.2860 (61.8% retracement) region, with the next downside region of interest coming in around 1.2630 (38.2% expansion) to 1.2680 (50% retracement), which sits just below the 100-Day SMA (1.2685).
  • Interim Resistance: 1.3460 (50% retracement) to 1.3481 (July high)
  • Interim Support: 1.1905 (2016-low) and 1.2100 (61.8% expansion)

IG Sentiment

Track Retail Sentiment in Real-Time with the New Gauge Developed by DailyFX

Retail trader data shows 47.4% of traders are net-long GBP/USD with the ratio of traders short to long at 1.11 to 1. In fact, traders have remained net-short since June 23 when GBP/USD traded near 1.2673; price has moved 1.4% higher since then. The percentage of traders net-long is now its highest since June 26 when GBPUSD traded near 1.27188. The number of traders net-long is 6.0% higher than yesterday and 15.8% higher from last week, while the number of traders net-short is 12.4% lower than yesterday and 21.2% lower from last week.

— Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

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