UK jobs preview: What to expect of GBP/USD?

The GBP/USD pair extends its rebound beyond 1.32 handle, with a major turnaround in risk sentiment providing fresh impetus to the going recovery in the cable. While the latest upmove behind the major can be largely attributed to a renewed rally in GBP/JPY, in wake of BOJ-induced broad yen weakness.

The UK labour market report from the Office for National Statistics (ONS) will be released at 8.30GMT this Wednesday.

Wages to dip in August

UK labor market report is expected to show that the number of people seeking jobless benefits have climbed by 1.8k in the three months to August, compared to a decrease of -8.6k  booked in the three months to July.

The unemployment rate is expected to remain at 4.9% during the period.   Average weekly earnings, including bonuses, in the three months to July are estimated to have dipped 2.1% year-on-year, following a 2.4% increase in the previous period. While ex-bonuses also the wages are expected to drop 2.2% versus 2.3% last.

Analysts at TDS note, “We expect the unemployment rate to tick up to 5.0% (consensus: 4.9%) from two months of 4.9%, while wage growth softens a touch with headline wage growth dipping below 2.0% y/y (consensus: 2.1%) while core wage growth falls to 2.1% y/y.”

Deviation impact on GBP/USD

Readers can find FX Street's proprietary deviation impact map of the event below. As observed the reaction is likely to remain confined between 20 and 45 pips in deviations up to 2 to -4, although in some cases, if notable enough, a deviation can fuel movements of up to 70 pips.

GBP/USD: Key technical levels to watch on UK data

Haresh Menghani, Analyst at FXStreet, explains, “The pair has decisively broken below an important confluence area near 1.3240 region, comprising of 200-SMA (4-hourly) and a short-term ascending trend-channel support, which might now act as immediate resistance for any attempted recovery. A follow through buying interest might assist the pair further but any additional up-move is likely to be capped at an important hurdle at 50-day SMA near 1.3300 handle.”

“On the flip side, the pair is finding some support at 50% Fibonacci retracement level of 1.2865-1.3445 near 1.3160 zone, which if broken is likely to accelerate the slide immediately towards 1.3080-60 support nearing 61.8% Fibonacci retracement level.”