GBP/USD Price Outlook: Critical point around 1.3600

GBP/USD Dynamics in European Trading

On Tuesday, the GBP/USD pair managed to recover some of its earlier losses during European trading but is still down about 0.23%, hovering around the 1.3600 mark. The British pound faced notable selling pressure following the release of UK labor market data for the last three months of 2022, indicating a continued decline in the job market.

According to the Office for National Statistics (ONS), the ILO unemployment rate has increased to 5.2%, marking the highest rate seen in five years. This was unexpected, as economists had forecasted the unemployment rate to remain unchanged at 5.1%. Moreover, job creation for the same period was at 52,000, a decline from 82,000 in the previous quarter.

Average earnings, which exclude bonuses and are seen as an important measure of wage growth, were up by 4.2% year-on-year, aligning with expectations but down from 4.4% last year and revised down from 4.5%. When bonuses are included, the average earnings fell to 4.2%, down from 4.6% reported for the three months ending in November.

With this in mind, investors are turning their attention to the UK Consumer Price Index (CPI) data for January, which is set to be released on Wednesday.

In the meantime, the US dollar has been relatively stable as the US markets prepare to open after a long weekend.

GBP/USD Technical Outlook

As of now, GBP/USD is trading at 1.3594, positioned below the 20-period exponential moving average (EMA) of 1.3624. This drop suggests a weaker short-term outlook.

The Relative Strength Index (RSI) for the 14-day period is at 42, below the neutral mark of 50, which signals a decrease in momentum. The downtrend from the 1.3907 high is in play, with resistance noted near 1.3652. If there is a clear breakthrough at this level, it may signal a potential recovery.

On the other hand, there’s an uptrend line beginning from 1.3366 that offers support around 1.3596. If the price were to close below this level, it could lead to a further decline toward the notable psychological barrier of 1.3500.