On the technical front, GBP/USD is expected to continue to rise in the short term
GBP/USD bearish bias strengthens, according to IG Client Sentiment
GBP/USD Fundamental Outlook
On Tuesday (January 17), the British Office for National Statistics (ONS) data showed that the unemployment rate in the three months to November 2022 (September-November) was 3.7%, in line with expectations; Wage growth rose to 6.4 percent from 6.1 percent previously, close to a record high of 7 percent, though still lagging behind the cost of living.
The ONS said that in real terms (adjusted for inflation), real wage growth in September-November 2022 was down 2.6% year-on-year in September-November 2022, with a larger decline dating back to February-April 2009, when the year-on-year decline 4.5%. In addition, the growth rate of fixed wages also fell by 2.6% year-on-year, slightly lower than the record 3% in April-June 2022.
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Against the background of ultra-high inflation, rising wages and a strong labor market in the UK, the Bank of England will continue to raise interest rates in its interest rate decision next month, which is likely to exceed expectations. In addition, the latest UK inflation data to be released tomorrow (January 18) deserves attention.
Chart source: DailyFX
Sterling edged up after the jobs data, with markets starting to price in further that the BoE will need to take more action at its next meeting to contain persistent inflationary pressures; in terms of technical indicators, price action remains above 20-day, 50-day and 200-day moving averages , In addition, the crossing of the 50-day and 200-day moving averages has released a bullish signal, and the GBP/USD pair is expected to continue the rebound since January 6 in the short term. The bullish target may be around the December 14, 2022 high (1.2448).
GBP/USD daily chart
Chart source: TradingView
IGCustomer Sentiment Index: GBP/USD
According to IG customer sentiment data, 50.02% of traders are net long, and the ratio of traders’ long to short positions is 1.00:1. The number of net long traders increased by 12.19% from yesterday and 14.43% from last week; while the number of net shorts decreased by 0.49% from yesterday and 15.57% from last week.
In general, crowd sentiment tends to act as a contrarian indicator, and current net longs mean that GBP/USD is likely to fall. The number of net-long traders has increased compared to yesterday and last week, which combined with the current and recent sentiment changes strengthens the GBP/USD short-term bearish bias.
(Written by Nick Cawley, translated by Chris Li)
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