GBPUSD Retraces Gains Ahead of UK Employment Data

Yesterday, the British pound rallied against most of its major counterparts on news that Nigel Farage, leader of the UK Brexit Party, announced that they will not contest the seats won by the Tory party in 2017. GBPUSD rallied by 72 pips at the wake of the news because it suggests that better political cohesion in parliament as they negotiate for a Brexit deal.

Currently, the currency pair has held on to most of its gains ahead of UK employment data for October.

The claimant count change report is eyed to show that unemployment claims for the month picked up to 24,200 from 21,100 in September. Meanwhile, the unemployment rate and average earnings are seen to have steadied at 3.9% and 3.8%, respectively.

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BOE Concerned About British Economy

Remember that there is dissension among the Bank of England (BOE) Monetary Policy Committee (MPC) with two members voting for a rate cut in their last meeting. Therefore, lower-than-expected readings on claimant count and unemployment rate would likely be bullish for GBPUSD because these would ease concerns about the economy. There would then be less pressure for the central bank to add further stimulus especially since yesterday’s GDP report showed that the UK avoided a technical recession in Q3 2019.

Technical Outlook for GBPUSD

On the hourly chart, GBPUSD has broken resistance of the falling trend line that I pointed out yesterday. The Fibonacci retracement tool shows that the currency pair has found support at the 38.2% Fib level at 1.2847 by connecting the low of November 8 to yesterday’s high.

Positive employment data from the UK could help GBPUSD rally to its November 1 highs around 1.2970. On the other hand, disappointing figures could send the currency pair tumbling back down to last week’s lows at 1.2867.

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