Two trades to watch: GBP/USD, Gold

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Fiona Cincotta
By :  ,  Market Analyst

GBP/USD rises above 1.17 after mixed jobs data

GBP/USD is extending gains for a fourth straight day after UK data showed that unemployment unexpectedly fell to 3.6%, down from 3.8%.

The fall in unemployment was owing to more people leaving the jobs market, a surprise development given the ongoing cost of living crisis. This latest development will worry BoE hawks amid fears that the shortages could continue to push wage growth higher.

Meanwhile, there were also signs of weakness starting to seep into what has proved to be a resilient jobs market. Employment rose by 40,000, well below the 125,000 forecasts, and vacancies have declined the most since summer 2020. Demand for workers is clearly starting to cool

UK wages excluding bonuses rose by 5.2%, ahead of forecasts, which the BoE will no doubt be watching ahead of next week’s interest rate decision.

While UK data will drive the movement in the European session, US inflation data will likely drive movement in the pair in the US session.

Where next for GBP/USD?

GBP/USD is extending its rebound from 1.1405, the 2022 low, rising above the multi-week falling trendline, and the 20 sma. This, combined with a bullish crossover on the MACD, keeps buyers hopeful of further upside.

Buyers will look to rise over 1.1760, the July 14 low, exposing the 50 sma at 1.19, which is also the August 29.

On the flip side, should bulls fail to defend the 20 sma at 1.1692, sellers could look to test 1.1520, the falling trendline support ahead of 1.1405.

 

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Gold holds gains ahead of US CPI data

In recent sessions, gold has been benefiting from the weaker USD and falling treasury yields. The precious metal booked its first weekly gain last week after three weeks of declines.

The prospect of being past peak inflation and the Fed softening its hawkish stance has helped push gold higher.

Today’s CPI data will likely set the tone for the markets over the coming week until the FOMC meeting.

US August CPI is expected to cool for a second straight month to 8% YoY, down from 8.5% in June and 9.1% in May. This would still be four times the Fed’s 2% target.  Fed officials have been vocal about their preference for front-load rate hikes, so it is unlikely that the central bank will shy away from a 75 basis point rate hike next week.

However, cooler inflation could raise the prospect of the Fed tempering the hawkish position after September’s jumbo, which would be good news for non-yielding gold.

Where next for Gold prices?

Gold trades in a falling channel dating back to March. The price found support at 1690 and is rebounding.

The price has run into resistance at the 20 sma at 1730; buyers will need to rise above here to expose the upper band of the falling channel at 1766, which is also the August 25 high. Beyond here, 1808, the August high comes into play.

Should the bears successfully defend the 20 sma, sellers could look towards 1690 and then to the 2022 low of 1680.

 

 

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