Two trades to watch: GBP/USD, EUR/USD

Research
Fiona Cincotta
By :  ,  Market Analyst

GBP/USD rises as the jobs market boom continues

 

GBP/USD is extending its rebound from a 2-year low last week, heading towards 1.20 following UK jobs data.

Unemployment held steady at 3.8%, defying forecasts of a tick higher to 3.9%. Meanwhile, 296k jobs were added in April, well above the 170k forecast and the largest increase since August last year. The timelier claimant count fell by 20.1k in June and a downwardly revised 34.1k in May.

Growth in regular wages rose 4.3%, up from 4.2%. However, overall growth, including bonuses, saw growth slow to 4.2%

The data shows that the UK labour market is resilient despite signs of economic slowdown showing up in other areas of the economy.

The BoE is expected to raise interest rates for a sixth time as it looks to tame surging inflation.

Where next for GBP/USD?

 

GBP/USD has been trading within a falling channel since March, falling to a low of 1.1760 last week. The pair rebounded off this lower level running into resistance at 1.2030, last week’s high.

Buyers will need to retake this level, and the 20 sna at 1.2080 and the upper band of the falling channel at 1.2180 to negate the downtrend, and a move over 1.2340 would create a higher high.

On the flip side, sellers could take cues from the bearish RSI and the fact that the price remains below its sma. A break below 1.19 round number opens the door to 1.1760, the 2022 low, with a break below here needed to extend the bearish run.

 

gbpusd1907fx

EUR/USD rises over 1.0150 ahead of CPI data

 

EUR/USD is capitalising on the weaker USD ahead of eurozone CPI data.

The USD has come under pressure across the past few sessions as investors pare back aggressive Federal Reserve bets. Fed hawks Bullard and Waller said they support a 75 basis point hike over 100 basis points. Meanwhile, Bostic said that hiking rates too steeply could hurt economic growth.

 Today attention is on the eurozone CPI data, which is the final reading and so should be much less of a surprise than the preliminary reading.

Expectations are for inflation to rise to 8.6% YoY in June, a record high. Hot inflation adds pressure to the ECB to hike interest rates more aggressively. The ECB is broadly expected to raise rates by 25 basis points on Thursday, although the risk of a larger hike are rising.

Where next for EUR/USD?

 

EUR/USD has rebounded off the 2022 low of 0.9950 but needs to find acceptance over 1.02. The bullish crossover on the MACD, combined with a move over 1.02, could keep buyers hopeful of a move towards 1.0340, the May low.

On the flip side, a move below parity brings 0.9950 in focus, with a break below here needed to extend the bearish trend towards 0.9910, the lower band of the falling trendline.

 

 

eurusd1907fx

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