The Pound trades lower although U.K wage growth beat expectations. The market was expecting a 2.4% wage growth but the release surprised everyone and printed at 2.6%. Moreover, the beat in wage growth justifies the BoE's controversial decision to hike rates last month. The British Pound is trading lower mainly due to the decrease in demand for high beta currencies amid risks associated with the trade tensions between the U.S and Japan, and the U.S and China. Additionally, the increase in U.S yields is strengthening the U.S Dollar and putting downward pressure on the Pound. U.S yields are in an uptrend now with the 10-year yield hitting a monthly high of 2.98%. For today, the focus will be on the U.S PPI figure which will give traders an idea on whether or not U.S yields should fundamentally rise. If the PPI figure beat expectations then U.S yields will rise and the Pound will be pressured by a stronger greenback.
After testing the 1.30356 resistance level twice, the pair formed a Bearish Reversal Double Top pattern. The rejection level also coincides with the 1.414 Fibonacci extension explaining why it was difficult for this level to be broken. Given the positive sentiment surrounding the U.S Dollar and the negative sentiment surrounding high risk currencies including the Pound, the pair points towards a drop in the direction of the next support level at 1.29608. The drop will only be confirmed if the pair breaks both the 13-period moving average and the minor support level at 1.29897.
Support: 1.29897 1.29608
Resistance: 1.30546 1.31484