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GBP/USD Daily Forecast – Sterling Recovers on Positive UK Jobs Data Following Dip Below 1.3000

Jignesh Davda

After running into resistance late last week, GBP/USD eased back on Monday. However, the UK jobs report has drawn fresh buyers in early trading on Tuesday after a brief drop below the psychological 1.3000 handle.

The employment rate in the UK reached a record high of 76.5%, prompting a move higher in Sterling. Employment was up 0.6% on the year and 0.4% on the quarter. The unemployment rate held steady at 3.8% for a third consecutive reading.

Averages wages were lower compared to the previous year and quarter. However, when adjusted for inflation, wages were estimated to grow 1.4% annually and 1.8% on a quarterly basis.

The British pound was the strongest major currency last week and GBP/USD made a notable recovery after turning higher from its 100-day moving average. The near-term trend is bullish and the pair shows signs that it might extend higher in the recovery after the jobs report.

The markets are expected to pick up later today as US traders return to their desks after a holiday on Monday. Early day volatility is seen in oil prices and the global equity markets which have fallen under pressure after Apple released a warning that it will miss on earnings.

Technical Analysis

GBP/USD is set to post a bullish reversal candle on a 4-hour chart which could be signaling that a near-term bottom is in place for GBP/USD after the decline yesterday.

The positive jobs report should put rate cut expectations at bay which will also tend to underpin Sterling.

Last week, a horizontal level at 1.3050 and the 50-day moving average capped the upside in the exchange rate. The same area remains a near-term target if GBP/USD can extend on the early day momentum.

In the event the pair turns lower, support is found at 1.2962.

Bottom Line

  • After a brief move lower, GBP/USD is showing renewed upside momentum as the UK jobs report showed the employment rate rising to a fresh record high.
  • The markets are expected to pick up later in the day as US traders return after a holiday on Monday.

This article was originally posted on FX Empire