- Office for National Statistics reported a dip in the unemployment rate from 4.8% to 4.7%, supporting the GBP/USD pair.
- Risk-off market sentiment triggered amid unrest in Afghanistan as the Taliban re-entered Kabul.
- Forex trading market participants may sell below $1.3790 to target the $1.3740.
The GBP/USD failed to stop its early-day bearish trend and traded at $1.3800. The declines in the currency pair have appeared despite the UK employment data unexpectedly dropping to 4.7% in June. However, the currency pair’s bearish bias was mainly sponsored by the US dollar’s strength, which benefitted from improving safe-haven demand.
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The continuous spread of COVID-19’s Delta variant and political tension in Afghanistan burdened the market trading sentiment. Investors’ concerns over the global economic fallout remain on the card. These concerns were fueled by disappointing Chinese macro data, which was released on Monday. This, along with increasing unrest in Afghanistan, weighed on investors’ sentiment and drove some haven flows towards the US dollar.
UK Employment Data Underpinds the GBP/USD Pair
The Office for National Statistics reported a dip in the unemployment rate from 4.8% to 4.7%, supporting the GBP/USD pair. The labor market is continuing to improve, according to the most current figures. In July 2021, the number of payroll employees in the workplace will increase by 182,000, bringing the total to 28.9 million.
Whereas the claimant count change showed a slight drop last month. In the meantime, the number of people claiming jobless benefits showed a decline of 7.8K in July versus -114.8K seen previously. The claimant count rate arrived at 5.7% vs. 5.8% last. In the same line, the UK’s average weekly earnings, excluding bonuses, came in at 7.4% 3Mo/YoY in June against +6.6% last and +7.4% expected, while the gauge including bonuses arrived at 8.8% 3Mo/YoY in June against +7.3% previous and +8.7% expected.
The GBP/USD currency pair maintained its bearish tone following the release of the UK employment data. The unemployment rate unexpectedly dropped to 4.7% during the three months to June. Conversely, the positive data may help the currency pair to limit its deeper losses. The GBP/USD is trading at 1.3802 and consolidating in the range between 1.3801 – 1.3855.
Coronavirus Concerns Pressure on the GBP/USD
The reason could be attributed to the long-lasting fears of the Delta covid variant, which has dampened the global economic recovery. This was witnessed after China released downbeat economic data, which showed that industrial production and retail sales grew slower than expected in July. The latest COVID-19 outbreak and freak weather in China have put a hole in the recovery of the world’s second-largest economy.
As per the latest covid data, infections in China and the US have been rising towards the early 2021 levels of late. Meanwhile, the Aussie figures also remain high, near August 2020 levels of around 500 daily cases.
The Taliban re-entered Kabul, Afghanistan.
The increasing unrest in Afghanistan as the Taliban re-entered Kabul is attributing to the risk-off market trading sentiment. Thus, investors seem to invest in the safe-haven US dollar. That’s driving the GBP/USD pair lower to 1.3795.
On the USD front, the US dollar maintained its early-day bullish performance. It drew further bids on the day as downbeat economic data from China. Furthermore, the continuous spread of COVID-19’s Delta variant and political tension in Afghanistan put negative pressure on the market’s risk mood, giving the safe-haven US currency a boost.
US Jerome Powell & Retail Sales Speech Ahead
Moving on, US Federal Reserve Chairman Jerome Powell is expected to speak at a town hall for educators later in the day. However, it is broadly anticipated that he will not address monetary policy at this meeting but wait until the central bank’s Jackson Hole symposium.
Looking forward, the market traders will keep their eyes on the US Retail Sales for July, which is expected to be-0.2% versus +0.6% prior. Apart from this, the speech by Fed Chair Jerome Powell at an online town hall event will be crucial to watch. Meanwhile, the headlines over the Sino-US tussle and the Taliban-Afghanistan matter will not lose their importance.
GBP/USD Price Forecast – Technical Analysis: Double Bottom to Support at 1.3790
The GBP/USD price forecast remains bearish amid mixed UK employment data. Currently, the GBP/USD is gaining immediate support at the 1.3792 level. That’s extended by a double bottom support level. A breakout of the 1.3792 level could push the GBP/USD pair lower towards the 1.3740 support level on the bearish side.
On the 4-hour timeframe, the GBP/USD has formed a “Three Black Crows” pattern that’s likely to trigger a bearish sell-off. The 50 day EMA (exponential moving average – red line) will extend an immediate hurdle at the 1.3840 level. A bullish crossover above 50 EMA could drive the GBP/USD price towards 1.3875.
The stochastic RSI indicator has crossed below 50, and now it’s demonstrating a bearish trend in the GBP/USD pair. Therefore, the Forex trading market participants may sell below $1.3790 to target $1.3740. All the best!
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