DailyFX.com -
- U.K. Jobless Claims to Contract for Fifth Consecutive Month.
- Average Weekly Earnings ex. Bonus to Slow for First Time Since November.
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Trading the News: U.K. Jobless Claims Change
Despite expectations for another 10.0K decline in U.K. Jobless Claims, a slowdown in household earnings may undermine the near-term advance in GBP/USD as it drags on interest-rate expectations.
What’s Expected:
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Why Is This Event Important:
Even though the Bank of England (BoE) remains upbeat on the U.K. economy, signs of weak wage growth may encourage Governor Mark Carney to retain the record-low interest rate throughout 2016 as the central bank struggles to achieve its 2% target for inflation.
Expectations: Bullish Argument/Scenario
| Release | Expected | Actual |
| Gross Domestic Product (YoY) (4Q F) | 1.9% | 2.1% |
| Lloyds Business Barometer (MAR) | -- | 43 |
| Retail Sales ex. Auto Fuel (MoM) (FEB) | -1.0% | -0.2% |
Signs of a stronger-than-expected recovery accompanied by the pickup in business sentiment may boost job/wage growth, and a positive development may heighten the appeal of the sterling as it puts pressure on the BoE to normalize monetary policy sooner rather than later.
Risk: Bearish Argument/Scenario
| Release | Expected | Actual |
| Construction Output s.a. (MoM) (FEB) | 0.0% | -0.3% |
| Manufacturing Production (MoM) (FEB) | -0.2% | -1.1% |
| Trade Balance (FEB) | -3.400B | -4.840B |
Nevertheless, the slowdown in global growth paired with easing outputs may drag on the labor market, and a dismal employment report may drag on the exchange rate as market participants push out bets for a BoE rate-hike.
How To Trade This Event Risk(Video)
Bullish GBP Trade: U.K. Job/Wage Growth Beat Market Expectations
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Need green, five-minute candle following the print to consider a long GBP/USD trade.
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If market reaction favors buying sterling, long GBP/USD with two separate position.
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Set stop at the near-by swing low/reasonable distance from entry; look for at least 1:1 risk-to-reward.
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Move stop to entry on remaining position once initial target is hit, set reasonable limit.
Bearish GBP Trade: Jobless Claims, Average Hourly Earnings Disappoint
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Need red, five-minute candle to favor a short GBP/USD trade.
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Implement same setup as the bullish British Pound trade, just in reverse.
Potential Price Targets For The Release
GBPUSD Daily
Chart - Created Using FXCM Marketscope 2.0
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Even though GBP/USD largely retains the downward trend carried over from late-August, the bullish divergence in the Relative Strength Index (RSI) may spur a larger correction especially as the pair appears to be carving an inverse head-and-shoulders patter in 2016.
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Interim Resistance: 1.4910 (61.8% retracement) to 1.4930 (38.2% expansion)
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Interim Support: 1.3870 (78.6% expansion) and 1.3960 (50% expansion)