GBP/USD Forecast: challenging strong resistance as UK wages rise
|- The UK jobs report came out better than expected, with Average Earnings standing out.
- The GBP/USD reacted positively to the publication, rising towards a stubborn resistance line.
- Sterling is better positioned technically ahead of the Fed decision later today.
UK Average Earnings are up 2.8% YoY, better than 2.6% that had been expected for the month of January. In addition, the figure for December was upgraded rom 2.6% to 2.7% YoY. Excluding bonuses, there were no surprises with 2.6% YoY after 2.5% beforehand, but this is good news anyway.
Another positive surprise was the drop in the Unemployment Rate back to 4.3% after a short spell at 4.4%. The only disappointment came from the Claimant Count Change for February, which showed a rise of 9,200 in the number of jobless claims, worse than a drop of 5,000 projected.
All in all, the figures came out above expectations and the GBP/USD rose from around $1.4040 to nearly $1.4070.
The good news helps Sterling recover from the disappointing inflation report yesterday which showed a deceleration to 2.7% YoY, worse than had been projected. The Bank of England convenes tomorrow and will digest all the data and also the Retail Sales report coming out tomorrow. On Monday, cable jumped on the news that a deal was reached between the EU and the UK on Brexit and the pair reached similar levels.
Yet before Mark Carney and co. have their say, the GBP/USD will be at the mercy of the US Federal Reserve. Fed Chair Jerome Powell is set to deliver a rate hike in his first decision as Fed Chair. Markets will focus on the next moves: the dot-plot for the remainder of the year, 2019, and the long-term rate. Moreover, there are reports that Powell will decide to hold a press conference after every rate decision, opening speculation for an accelerated path of hikes.
See Fed Preview: Dollar-friendly dot-plot before a Powell punishment?
GBP/USD Technical Picture - Stops at resistance for now
The GBP/USD is looking good: the RSI is significantly above the 50 point and maintains a safe distance from overbought territory. Momentum is picking up and the pair is above the 50-day Simple Moving Average.
At the time of writing, the pair is struggling with resistance at $1.4070. The line capped the pair on Tuesday and on February 26th. The knee-jerk move to $1.4088 on Monday was shortlived and looks like a false break.
Further above, $1.4160 capped the pair on February 16th and $1.4250 is next up.
The round number of $1.4000 serves as support, and it is followed by $1.3940, the 50-day SMA. Further below, $1.3890 was a low point last week.
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