Today, the UK labor market data was released, and it showed that employment growth exceeded expectations. This positive news had an initial bullish impact on GBP/USD, causing it to rise above 1.3100. However, the pair retraced shortly after, indicating that bulls are struggling to capitalize on the strong data. This could potentially signal the dominance of bears in the market.
According to ING analysts, the better-than-expected labor market data supports the view that the Bank of England will cut interest rates more cautiously compared to the Federal Reserve. On the other hand, Capital Economics analysts suggest that the Bank of England is unlikely to lower rates for a second consecutive month at the upcoming policy meeting. This divergence in views adds uncertainty to the market.
Technical analysis of GBP/USD today reveals several bearish signals. The price failed to stay above the previous high around 1.314, indicating a lack of bullish momentum. Additionally, a bearish engulfing pattern at the market’s peak and a long upper wick on the 6 September candlestick point to potential downward pressure on the pair. Bulls may find support from the median of the linear regression channel, but it remains to be seen if this will be enough to prevent further declines.
The direction of GBP/USD in the near term will depend on tomorrow’s US inflation data. The release of the Consumer Price Index (CPI) figures at 15:30 GMT+3 could provide further clarity on the economic outlook. Traders are advised to stay informed and monitor market developments closely to make informed trading decisions.
The UK labor market data has had a mixed impact on GBP/USD. While the initial response was bullish, the pair retraced shortly after, signaling potential bearish pressure. Traders should pay close attention to upcoming events, such as the US inflation data release, to gauge the future direction of the currency pair. Technical analysis points to bearish signals, adding to the uncertainty in the market. It is essential for traders to remain vigilant and adapt their strategies accordingly to navigate the volatility in the forex market.