The number of unemployed Brits fell dramatically – this unexpected improvement sent the Pound higher, sent the Pound above a major resistance line. Will this hold? A big test for GBP/USD – it could mark a long term turnaround.
Claimant Count Change is the earliest and most important employment indicator in Britain. It reflects the number of unemployed people in the UK. After two months of drops, last month’s figure showed a big rise of 23,500 in the number of unemployed people. So, the first surprise for today was that last month’s number was revised to a rise of only 5,300. This is far better. And the big surprise is with the fresh figures:
A drop of 32,300 people was reported in February. This is the biggest drop in unemployment since 1997, and a huge surprise. The unemployment rate (for January) remained unchanged at 7.8%, as expected.
GBP/USD leaps
The British Pound already enjoyed the US dollar’s weakness to rise above 1.5220. As aforementioned, the big hurdle was 1.5350. And this line was just broken! GBP/USD now trades at 1.5360. It’s important to stress that this move needs to be confirmed. A breach of 10 pips is still limited, and it’s too early. We’ll see how the Pound trades through the New York session, which opens earlier due to early DST.
If this break is confirmed, it’s a significant move for GBP/USD. 1.5350 was an important support and resistance line in the past, and also held the Pound back in mid-February. After this line was broken to the downside, GBP/USD collapsed very quickly down to 1.4780.
Long term change?
These great and very surprising employment figures could mean a full recovery, and a shift in the long-term bearish trend.
The next line of resistance is 1.5520, a place where the Pound struggled before falling down. Higher, 1.5833 is a major resistance line that limited the pair’s attempts to rise. It also served as a support line beforehand.
If the break isn’t confirmed, 1.5220 serves as initial support, followed by 1.4870 and then 1.4770. Also note the round number of 1.50, but in the recent days it hasn’t been a significant line.
No New QE
At the same time, the meeting minutes from the last rate decision were released. The meeting minutes showed that all 9 members of the MPC voted to leave the Quantitative Easing program unchanged at 200 billion pounds. The money already ran out of this program, that spills pounds into the markets, and hurts the Pound.
Mervyn King didn’t rule out injecting fresh money into the program, but time passes by and this doesn’t happen. This recovery in jobs makes the chance of this happening very slim.
I’ll keep following the moves of Pound.
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