TheNews

Trading the News: U.K. Jobless Claims Change

Another 9.1K decline in U.K. Jobless Claims paired with signs of stronger wage growth may heighten the appeal of the British Pound and spur a near-term advance in GBP/USD as it puts increased pressure on the Bank of England (BoE) to normalize monetary policy sooner rather than later.

What’s Expected:



Even though the EU referendum clouds the economic outlook for the U.K., a further improvement in labor-market dynamics may spur a split within the Bank of England (BoE) as central bank officials remain upbeat on the economy and see a risk of overshooting the 2% inflation-target over the policy horizon.

Nevertheless, waning confidence along with the slowdown in service-based activity may drag on employment, and a dismal labor report may produce near-term headwinds for the sterling as it market participants push out bets for a BoE rate-hike.

How To Trade This Event Risk
Bullish GBP Trade: U.K. Job/Wage Growth Exceed Market Forecast

• Need green, five-minute candle following the print to consider a long GBP/USD trade.
• If market reaction favors buying sterling, long GBP/USD with two separate position.
• Set stop at the near-by swing low/reasonable distance from entry; look for at least 1:1 risk-to-reward.
• Move stop to entry on remaining position once initial target is hit, set reasonable limit.

Bearish GBP Trade: Jobless Claims, Average Hourly Earnings Disappoint

• Need red, five-minute candle to favor a short GBP/USD trade.
• Implement same setup as the bullish British Pound trade, just in reverse.

Potential Price Targets For The Release
GBPUSD Daily

• Long-term outlook for GBP/USD remains tilted to the downside as the pair largely retains the downward trend from August, but there appears to be a divergence in the Relative Strength Index (RSI) as the oscillator carves a higher-low in February and threatens the bearish formation carried over from the previous year.
• Interim Resistance: 1.4910 (61.8% retracement) to 1.4930 (38.2% expansion)
• Interim Support: 1.3870 (78.6% expansion) and 1.4000 pivot

more...