- The euro is pressing against the top of the negotiation range last month, at 0.8460.
- The pound loses ground, affected by the weak employment data of the United Kingdom.
- Above 0.8460, the measured objective of the H&S is 0.8540.
The euro is contributing up on Tuesday, while the pound is affected by the employment figures of the disappointing United Kingdom and a gentle salary inflation, which has strengthened the argument for a greater relief of the BOE in the coming months.
Applicants for unemployment benefits increased by 33.1k in May, more than three times the increase of 9.5K provided by market analysts. The unemployment rate increased to 4.6%, its highest level in four years, and salary growth slowed 5.2%, below the expected 5.3%.
Technical analysis: EUR/GBP could have reached a minimum at 0.8360
The technical image suggests that the bearish cycle from the top of mid -April could have been completed at 0.8360, and the torque is about to correct upwards. An upward divergence in the 4-hour RSI, which is now exceeding level 50, and a potential inverse shoulder-hombre pattern are supporting that vision.
The United Kingdom data has driven the euro, which is stepping on the area of ​​0.8450-0.8460, an earlier support, now converted into resistance and the neck line of the aforementioned shoulder-shrimp pattern-hombro.
A confirmation above displaces the approach to the measured objective of the H&S formation in the maximums of April 25 and May 2, in the area of ​​0.8540, before the maximum of April 21, at 0.8620.
In the lower part, a bearish reaction below 0.8360 cancels this vision and increases the pressure towards 0.8325 (minimum of April 3) and the minimum key of the year until the date of 0.8245.
EUR/GBP daily graphics
FAQS EMPLOYMENT
The conditions of the labor market are a key element to evaluate the health of an economy and, therefore, a key factor for the assessment of currencies. A high level of employment, or a low level of unemployment, has positive implications for consumer spending and, therefore, for economic growth, which drives the value of the local currency. On the other hand, a very adjusted labor market – a situation in which there is a shortage of workers to cover vacancies – can also have implications in inflation levels and, therefore, in monetary policy, since a low labor supply and high demand lead to higher wages.
The rhythm to which salaries grow in an economy is key to political leaders. A high salary growth means that households have more money to spend, which usually translates into increases in consumer goods. Unlike other more volatile inflation sources, such as energy prices, salary growth is considered a key component of the underlying and persistent inflation, since it is unlikely that salary increases will fall apart. Central banks around the world pay close attention to salary growth data when deciding their monetary policy.
The weight that each central bank assigns to the conditions of the labor market depends on its objectives. Some central banks have explicitly related mandates to the labor market beyond controlling inflation levels. The United States Federal Reserve (Fed), for example, has the double mandate to promote maximum employment and stable prices. Meanwhile, the only mandate of the European Central Bank (ECB) is to maintain inflation under control. Even so, and despite the mandates they have, labor market conditions are an important factor for the authorities given its importance as an indicator of the health of the economy and its direct relationship with inflation.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
