Soho, London | UK - 2021.04.16: People sitting in pubs and restaurants on Friday evening after ending of Coronavirus Lockdown. Image source: ©Sandor Szmutko © 123RF.com
The GBPUSD pair rose sharply today on the better-than-expected labour market numbers for April. Unemployment fell by 0.1 per cent while the number of people claiming benefits decreased by 15.1 thousand.
The GBPUSD is still advancing in a decisive uptrend, which was strengthened recently following the publication of the robust GDP data for the first quarter. Meanwhile, the April CPI data is expected to be the biggest catalyst for the pair this week.
GBPUSD 1D Price Chart. Image source: Trendsharks ©, created with TradingView.com
The GBPUSD is trading just below the historic resistance level at 1.42430, which was last broken in April 2018. The sheer prominence of this level alone could at the very least cause a minor disruption to the underlying uptrend. This is what happened the last time that the price action tested the resistance.
The resulting Left Top was exemplified by a Shooting Star candle, which signalled an imminent reversal. If the current upswing is terminated below 1.42430 yet again, this would signal the completion of a Double Top pattern.
Double tops are typically taken to signify likely bearish reversals, which could result in a new correction headed towards the next psychologically significant target at 1.40000 or the 23.6 per cent Fibonacci retracement level at 1.38730.
While the MACD indicator underscores the prevailing bullish momentum in the market at present, the price action is nearing the upper boundary of the ascending channel. This, too, could end up catalysing a new bearish correction.
Opening Up the Economy Supported Employment Growth
Unemployment in Britain fell for the third consecutive month because of the steady easing of government restrictions. It was downwardly revised to 4.8 per cent, thus exceeding the initial forecasts.
UK Unemployment Rate. Image source: TradingEconomics.com
The biggest surprise by far was the recorded number of people claiming unemployment benefits. It fell sharply by 15.1 thousand while the consensus forecasts were anticipating an uptick of 25.6 thousand.
UK Claimants Count Change. Image source: TradingEconomics.com
The labour force survey of the Office for National Statistics for April confirms the pick-up in British economic activity that is driving the robust recovery. Despite all of these positive developments, however, all eyes are currently focused on the CPI data scheduled for publication tomorrow.
Headline inflation is expected to have doubled last month, which could tip the overbought sterling towards a new correction.
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