Today marks an important occasion for the US economy as inflation data is set to be unveiled, stirring anticipation for potential market fluctuations. However, prior to this crucial announcement, the GBPUSD currency pair had already witnessed movement spurred by labour data from the UK. Despite the UK unemployment rate maintaining stability at 3.8%, below the anticipated 4%, it dropped more than expected from the revised prior rate of 4.2%.
Notably, average quarterly earnings growth, including bonuses, surpassed projections at 5.8%, outstripping the forecasted 5.6% from the revised prior rate of 6.7%. These indicators hint at a tight labour market, which may pose considerations for the Bank of England as it contemplates potential rate adjustments later in the year. However, tempered by a more cautious outlook, the employment change figure of 72K fell short of the consensus of 73K. Nonetheless, this slight deviation failed to deter the initial surge in the GBPUSD currency pair’s upward trajectory immediately following the data release. Now, all attention turns to the forthcoming US inflation data, anticipated to determine the sustainability of this momentum.
Technical
On the 4H chart, an ascending triangle has formed, with the psychological resistance at 1.2642 experiencing a breakout triggered by the UK labour data. However, a retracement is now on the cards to determine whether the breakout will be sustained or whether the bullish rally lacks the legs to continue its run.
If the price falls back below 1.2642, the price could look for support where the 25-SMA (green line) and 50-SMA (blue line) meet. Any movement below these levels could trigger a breakdown of the triangle support toward 1.2607. If a retracement fails to get triggered at this point, the bearish run could be sustained toward 1.2580 and 1.2549.
However, if the retracement of the current breakout confirms the bullish presence with a bounce off 1.2642, the price could run toward 1.2668, where the 100-SMA (orange line) offers additional resistance. The 61.8% Fibonacci golden ratio could then come under the spotlight at 1.2676 as a pivotal level in the currency pair’s trajectory.
Summary
The GBPUSD currency pair has entered a bullish run ahead of the US CPI data later today. Support at 1.2642 could be worth watching in the upcoming sessions to determine whether the breakout from the ascending triangle could be sustained.
Sources: Koyfin, Tradingview
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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