Daily Market Recap – GBPUSD Strong UK jobs report supports the pound

The British pound has rallied in recent sessions in the foreign exchange market, including against the powerful greenback. The pound is being supported in the short term by the growth prospects for normalization of monetary policy by the Bank of England (BoE) after it created doubt earlier this month by unexpectedly keeping monetary policy unchanged.

BoE Governor Andrew Bailey acknowledged on Monday that inflation, which reached 3.1% year-on-year in September in the UK, made him “very uncomfortable”, and did not rule out a rate hike as early as December.

In addition, employment data released this morning showed a very tight labor market with the unemployment rate at its lowest level since July 2020, at 4.3%, and wage growth above expectations, at 5.8% year-on-year.

Naturally, short-term bond yields jumped in the wake of the jobs report, and the British pound strengthened, even outperforming all other major currencies this morning.

From a technical perspective, the outlook for the GBPUSD has become bullish again since yesterday after the exchange rate formed a “swallow” on Friday. This Japanese candlestick pattern paves the way for a bullish reversal.

The first resistance to watch will be the pivot at $1.3670, then the bearish oblique that runs through the July, September, and October highs (purple in the chart).

This bullish outlook would be technically invalidated in case of a pullback below Friday's low of $1.3350.

 (Chart Source: Tradingview 17.11.2021)

The next catalysts for the GBPUSD pair will be the US Retail Sales and Industrial Production releases, UK CPI on Wednesday, and UK Retail Sales on Friday.

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.