GBP/USD forms cup and handle ahead of UK inflation data

By: Crispus Nyaga
Crispus Nyaga
Crispus is a Financial Analyst for Invezz covering the stock, cryptocurrency and forex markets. He’s an experienced analyst with… read more.
on May 17, 2022
  • The GBP/USD popped after the UK jobs data.
  • The unemployment rate declined to the lowest level since 1974.
  • The pair has formed a cup and handle pattern on 1H chart.

The British pound rose to the highest point since May 5th after the positive UK jobs data. The GBP/USD pair rose to a high of 1.2480, which was about 2.70% above the lowest level last week. The pair is still more than 5% below the highest point in April.

UK employment and inflation data

The Office of National Statistics (ONS) published strong employment numbers on Tuesday. The numbers revealed that the country’s labor market continued to tighten in March. 

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The UK unemployment rate declined to 3.7% in March. This was a better number than what most analysts were expecting. It was also the lowest level it has bee since 1974. This means that there were fewer people out of work in the three months to March.

A closer look at the report reveals that the size of the workforce in the UK was smaller than where it was before the pandemic started. This happened as many people said that they were neither working nor looking for work.

These numbers came a day ahead of the upcoming UK inflation numbers. Economists polled by Reuters expect the data to show that the headline consumer price index jumped from 7.0% in March to 9.1% in April. Excluding the volatile food and energy products, they expect the data to show that inflation rose from 5.7% to 6.2%. 

On Monday, the Bank of England governor lamented that the bank was not able to avoid a situation where inflation fails to get to 10%. He cited external factors like the war in Ukraine and logistics challenges for the soaring inflation. 

The GBP/USD pair also rose after the positive US retail sales data. According to the statistics agency, retail sales rose by 8.19% while core sales rose by 0.6% on a MoM basis.

GBP/USD forecast

GBP/USD

On the hourly chart, we see that the GBP/USD pair has been in a strong bullish trend since Monday. It managed to move above the important resistance at 1.2400, which was the highest point on Friday. The pair has also formed a cup and handle pattern, which is usually a bullish sign. 

It has also moved above the 25-period and 50-period moving averages while the Relative Strength Index (RSI) has moved above the overbought level. The pair will likely keep rising as bulls target the key resistance at 1.2600.

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