Technical Analysis of the GBP/USD: Nearest Selling Levels
Since the start of this week's trading, the GBP/USD pair has been dominated by bullish performance, with gains towards the 1.2300 resistance level. At the time of writing the analysis, it is stable near it. This comes as investors have abandoned the US dollar following the recent announcement of lower US inflation figures.
In contrast, the British economy added more jobs than expected in November, while wages grew faster than expected, keeping the Bank of England under pressure to keep raising interest rates.
As a result, the British pound rose after the Office for National Statistics reported a 27 thousand job increase in the three months to November, which was unchanged from the previous month but higher than expectations for a 5 thousand decrease.
The unemployment rate in the country remained unchanged at 3.7%, while the number of people receiving non-work benefits increased by 19.7 thousand, less than the 19.8 thousand expected by markets.
The pound is rising in value.
Despite six consecutive quarterly declines, the number of job vacancies remains at historically high levels, indicating that the labor market remains historically "tight" and consistent with persistent wage inflationary pressures, according to the Office for National Statistics. This confirms the Bank of England's ability to raise interest rates, thereby supporting the pound sterling. At the time of writing, the market reaction was largely consistent with this theme.
Money market traders are increasing their bets on a BoE rate hike following Wednesday's inflation report, which highlighted near-record UK wage growth. They increased their bets by 6 basis points, predicting a bank rate of 4.56% by September, the highest level in nearly a week.
Two-year US Treasury yields, which are among the most sensitive to monetary policy changes, rose 5 basis points to a two-week high of 3.57%. The pound was set to finish at a five-week high.
Gas prices have dropped by more than 80% since last year's record high, and headline inflation is expected to slow to 10.5% in December, the first decline since the pandemic began in 2020. While policymakers in the United Kingdom slowed the pace, Governor Andrew Bailey warned that the risks to the inflation outlook remain tilted to the upside after tightening to 50 basis points last month.
GBP/USD analysis today:
The price of the GBP/USD pair is currently on an upward trend.
Moving toward the 1.2330 resistance level will confirm this and push the technical indicators into overbought territory.
Despite easing expectations about the future of the Fed's policy, I continue to prefer selling the Sterling Dollar at any bullish level. This is offset by pessimistic forecasts for the British economy's recovery.
However, based on past performance, a move toward the 1.2095 support level will signal the end of the current bullish trend. The sterling-dollar pair will be influenced today by the release of British inflation figures, followed by the release of US economic data, the producer price index, and retail sales figures.