Labour market conditions in Britain worsened in the three months leading to November 2020, as Boris Johnson's government was forced to tighten the epidemic restrictions at that time owing to rising coronavirus cases.
The unemployment rate thus edged higher to 5.0 per cent from the previously recorded 4.9 per cent, say the Office for National Statistics. The final result fell below the preliminary market expectations for a surge to 5.1 per cent in headline unemployment.
Even though this was the fifth consecutive month of increasing unemployment, there are yet reasons for optimism. Namely, the number of people claiming benefits for the same period came significantly below the initial projections.
The Office for National Statistics recorded the claimant count at 7 thousand, which is considerably lower than the 38.1 thousand people who filed for support in October and the 47.5 thousand people expected to claim benefits in November.
Both of these factors cushioned the potentially adverse impact of rising unemployment on the value of the sterling, which has had a remarkable, bullish run as of late.
As can be seen on the 4H chart below, the GBPUSD continues to trade near the recent swing high, and a major bearish correction is yet to form. The underlying price action appears to be in the process of consolidating below the major resistance level at 1.37000 while developing an Ascending Wedge pattern.
Trading on the cable at present entails a high degree of risk because the underlying pieces of evidence do not seem to be pointing all in the same direction. While the fundamentals are mostly favourable for the continuation of the pound's ascend, most technical indicators are mostly demonstrative of a potential break in the trend.
Given that the price action has already failed to break out above the major resistance at 1.37000 decisively and is currently in the process of establishing the aforementioned wedge, which typically entails a likely bearish reversal, the uptrend's continuation seems at peril.
Meanwhile, the price action appears to be testing the strength of the 100-day MA (in blue) as a floating support, while the underlying market momentum is becoming increasingly more bearish, as underscored by the MACD indicator.