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An Analysis of GBPUSD

The British economy and the Great British Pound is continuously changing each day with COVID-19, EU/UK Brexit negotiations ongoing and the market eager to see Biden’s stance towards the UK. As traders of the GBPUSD instrument, it is important to keep up with all the latest developments within regards to both the British and US economy.

Over the last 24 hours the September data on the British labor market recorded a general deterioration. The unemployment rate rose from 4.5% to 4.8%, the total number of unemployed exceeds 1.6 million. The employment rate fell by another 164K, and reached 75.3%, which is 0.8% less than in the same period last year. The total number of layoffs in British companies from July to September amounted to a record 314K people. 

The unemployment in the UK is a real concern to investors as the figure has been continuously rising whereas in the US the unemployment figure has been declining for 7 consecutive months. In the US the Unemployment rate was just under 15% unemployment and has now dropped to below 7% with 638,000 more individuals employed during October. When comparing with the UK it is easy to see why traders may be cautious. The UK’s unemployment rate has been rising for 4 consecutive months and the country has again entered into lockdown. The UK’s unemployment rate is now the highest it has been in over 3 years.

Chancellor Rishi Sunak calmed the market, saying the government will continue to support the affected workers. Despite the publication of negative data, the Great British Pound did not experience serious pressure. Investors are hoping for a new vaccine from Pfizer and BioNTech that demonstrates high efficiency, as well as to change the approach towards trade relations with the EU and PRC

The Bank of England has released 150 billion pounds to attempt to support the UK’s struggling economy as a second COVID blocking mechanism comes into effect. It is hoped that the liquidity boost will mitigate the economic blow of the severe nationwide restrictions, while a grim warning is sounded about a collapse in the country’s economic performance in the last three months of 2020.

The Central Bank’s Monetary Policy Committee voted unanimously to expand the quantitative easing program to £895 billion, but kept interest rates at a historic low of 0.1 percent. They advised that the gross domestic product, the value of a country’s products and services, would rise in the first quarter of 2021, but warned that activity would still remain “much lower” than before the COVID crisis.

Yesterday, Prime Minister Boris Johnson said that the contours of the agreement are already clear and the deal “should be concluded”. The head of the European Commission, Ursula von der Leyen, also said that there has been some progress in the negotiations. Consensus must be found before December 31, when Britain will finally leave the European bloc. The pound is supported by news from the British Parliament, where the House of Lords voted against giving the government the ability to circumvent the Brexit provisions already agreed with the European Union. It is assumed that this decision may contribute to the conclusion of a trade deal between the parties. 

As traders it is important to also look at the technical elements of the asset which cover price action, indicators and trend analysation. Currently the price movement is in favor of the GBP but traders should be aware the movement may change quickly. Currently the Moving Averages and Stochastic Oscillators have crossed over upwards indicating an upwards trend but at the same time the RSI and SO has indicated the asset is overpriced in the short to medium term. It is vital that traders continue to assess the price movement alongside the activity happening within the market.

Resistance levels: 1.3305, 1.3427.

Support levels: 1.3061, 1.2939, 1.2817.

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