FX.co ★ Labor market and quarantine measures in the UK

The attention of investors is now focused on the UK labor market, where unemployment rate rose less than economists had expected, as the expansion of state aid helped protect some jobs amid widespread closures.

The unemployment rate rose to 5.0%, against the 5.1% increase expected by experts. But according to the Office for National Statistics, such level is still the highest since 2016. At the same time, employment data in the country declined by 88,000 people, which was less than the expected – 100,000.

Before December 2020 ended, 828,000 people was recorded to have lost their jobs since the pandemic began and hit a record high in November.

The United Kingdom's coronavirus-related restrictive measures are making the economy suffer. Surveys also suggest that the third lockdown could be the final blow for thousands of companies struggling to pay rent and taxes with little or no money.

According to CGA and AlixPartners, 250,000 small companies are on the verge of bankruptcy and nearly 10,000 pubs and restaurants licensed to sell alcohol closed permanently last year.

Andrew Wong, owner of a popular Chinese restaurant in London, said that thousands of pounds a week is needed to maintain a restaurant even when closed, causing the loss of income. He also added that he is thinking of closing the restaurant.

The situation is just depressing more than ever and it will be more difficult due to the restrictive measures.

Such a sad outlook may force the Chancellor of the Exchequer, Rishi Sunak, to expand support for business. The Treasury has already spent around 300 billion pounds ($400 billion) to support workers and businesses during the crisis, raising its debt above 2 trillion pounds for the first time.

With all the negativity, the pound is unreasonably doing good if you evaluate it at the current rate, which is close to the high of the medium-term upward trend.

The overbought status has been haunting the pound for a long time, and despite everything, speculators are not in a rush to make actions.

Analyzing the trading chart, you can see that the quote reapproached the area of the absolute maximum of this period just the other day, which means that there is still no correction in the market. If you switch to the European currency, where the overbought status also takes place, then there has been a correction since the beginning of January.

It should be recalled that the area of 2018 is already above the quote, where a reversal of the mid-term upward trend appeared in history. To better understand the current situation, it is suggested to open the daily period and move to the beginning of 2018, from which a trend reversal can be observed. The area of which is already affected by the current quote.

In this case, there is a high possibility that a full-scale correctional move for the GBP/USD pair will be implemented in the market. However, this will not lead to a change in the current trend, but will only locally reduce the overbought status in the market.

In terms of the economic calendar, we only have the S&P/CS Composite-20 (composite index of housing costs for the United States), where it is expected to rise from 7.9% to 8.6%. This index will be published by Standard and Poor's and reflects the change in the value of residential real estate in 20 regions of the United States. It is an important indicator of the real estate market. The growth of the index may signal a possible strengthening of the US dollar.

If we analyze the current trading chart of GBP/USD, it can be seen that the statistics, which came out slightly better than expected, did not support the pound. Its price declined below last Friday's low (1.3635) and continues to further decline.

If the downward interest persists in the market, we can consider a movement in the direction of the values 1.3530-1.3460. To form a large corrective move, the quote must hold below the level of 1.3450 in a four-hour period.

An upward development in the direction of the medium-term trend will be considered if the price holds above the level of 1.3750 in the daily period.

Indicator analysis

Analyzing different sectors of time frames (TF), it is clear that the indicators of technical instruments on the minute and hour periods signal a sale due to the price rebound from the local trend high. In turn, the daily period is still focused on growth, signaling a purchase.

Weekly volatility / Volatility measurement: Month; Quarter; Year

The volatility measurement reflects the average daily fluctuations, calculated per Month/Quarter/Year.

The current dynamics is only 69 points, which is almost half below the average. Considering that yesterday's activity was unusual low, we can assume that a strong growth awaits us soon.

Key levels

Resistance zones: 1.3750 **; 1.3850; 1.4000 ***; 1.4350 **.

Support zones: 1.3610 *; 1.3300 **; 1.3000 ***; 1.2840/1.2860/1.2885; 1.2770 **; 1.2620; 1.2500; 1.2350 **; 1.2250; 1.2150 **; 1.2000 *** (1.1957).

* Periodic level

** Range level

*** Psychological level