GBP/USD Vulnerable to Rise in UK Unemployment Rate

British Pound Outlook: GBP/USD

Data prints coming out of the UK may drag on the British Pound amid expectations for a rise in the unemployment rate, but GBP/USD may stage further attempts to test the February 2022 high (1.3644) should it defend the advance from the start of the month.

GBP/USD Vulnerable to Rise in UK Unemployment Rate

Keep in mind, GBP/USD broke out of the May range during the previous week to register a fresh yearly high (1.3617), and the recent weakness in the exchange rate may turn out to be temporary as it still appears to be tracking the positive slope in the 50-Day SMA (1.3292).

UK Economic Calendar

However, signs of a weakening UK labor market may generate a bearish reaction in GBP/USD as the ILO Unemployment Rate is projected to increase to 4.6% in April from 4.5% the month prior, while claims for jobless benefits are expected to rise 4.5K in May.

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In turn, the British Pound may face headwinds ahead of the next Bank of England (BoE) meeting on June 19 as indications of a slowing economy puts pressure on the central bank to implement lower interest rates, but a batch of better-than-expected UK data prints may push the Monetary Policy Committee (MPC) to the sidelines following the 5-4 split to deliver a 25bp rate-cut in May.

With that said, GBP/USD may retrace the pullback from last week should it defend the advance from the monthly low (1.3454), and the exchange rate may continue to track the positive slope in the 50-Day SMA (1.3292) as it holds above the moving average.

GBP/USD Price Chart – Daily

Chart Prepared by David Song, Senior Strategist; GBP/USD on TradingView

GBP/USD gives back the advance from the start of the month after struggling to test the February 2022 high (1.3644), and lack of momentum to hold above the 1.3410 (78.6% Fibonacci retracement) to 1.3460 (23.6% Fibonacci extension) region may push the exchange rate back toward 1.3310 (100% Fibonacci extension).
Next area of interest comes in around 1.3210 (50% Fibonacci extension), but GBP/USD may stage further attempts to test the February 2022 high (1.3644) as it holds above the monthly low (1.3454).
A break/close above 1.3650 (38.2% Fibonacci extension) opens up the 2022 high (1.3749), with the next area of interest coming in around 1.3800 (161.8% Fibonacci extension) to 1.3810 (50% Fibonacci extension).

Additional Market Outlooks

US Dollar Forecast: USD/JPY Breaks Out on Upbeat US NFP Report

Euro Forecast: EUR/USD Post-ECB Rally Eyes April High

Canadian Dollar Forecast: USD/CAD Drops as BoC Stays on Hold

US Dollar Forecast: USD/CHF Clears May Low

--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong

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