Two trades to watch: GBP/USD, Gold

GBP/USD falls as unemployment unexpectedly falls & BoE intervenes

GBP/USD is heading lower for a sixth straight session after UK unemployment unexpectedly falls.

The rate of unemployment drops to 3.5% from 3.6%. The fall in unemployment comes as the number of people leaving the workforce rose by the most since data started in 1971. Across the past 3 months, 252,000 people left the workforce.

Interestingly the deepening cost of living crisis isn’t bringing people back to the workforce. The drop in available workers is putting pressure upwards on wages. Average wages, excluding bonuses, rose 5.4%. However, this is still well below inflation, suggesting that the squeeze on household wages will intensify.

The BoE has also announced a pause to corporate bond sale operations and widened its emergency bond purchases to include inflation linked gilts in its latest attempt to stem risk to UK financial stability. BoE Governor Andrew Bailey will speak later.

Looking ahead, there is no major data from the US. However, traders could start to position for FOMC minutes release tomorrow and inflation data on Thursday.

Where next for GBP/USD?

After running into resistance just shy of 1.15 in early October, GBP/USD has fallen back below support at 1.14, the 20 sma, and the falling trendline. The RSI supports further losses.

Support can be seen at 1.10, the psychological level, with a fall below here opening the door to 1.0930 the September 26 high. A break below here opens the door to 1.0640, the September 27 low.

On the flip side, buyers will look for a move over 1.11, the falling trendline resistance, and 1.1190 the 20 sma.

Gold holds yesterday’s losses

Gold fell 1.7% yesterday and is holding onto those losses today as the firmer USD and firmer yields keep the precious metal out of favour. Bears pushed the price to 1660, where they are taking a breather before another potential leg lower.

Risk-off trade and hawkish Fed bets continue to boost the greenback. Russia escalating the war with Ukraine, the US chip crackdown to China are hurting the market mood.

Meanwhile, Federal Reserve vice Chair Lael Brainard reiterated the Fed’s commitment to fighting inflation. Her comments come ahead of the FOMC minutes due tomorrow and US CPI inflation data due on Thursday.

Where next for Gold prices?

Gold ran into resistance at the 50 sma around 1728 earlier in the month and closed below the 20 sma yesterday. The RSI points to further losses below 50.

Sellers will look for a move below 1655, bringing 1614, the 2022 low, into target.

Buyers could look for a move back over the 20 sma at 1674 and 1700 round number, ahead of 1709, the falling trendline resistance.