UK labour market data was released today.

According to Dow Jones Newswires:

→ Employment growth exceeded expectations, and unemployment benefit claims came in lower than forecast. ING analysts believe this supports the view that the Bank of England will cut interest rates more cautiously compared to the Federal Reserve.

→ Capital Economics analysts also suggest that the Bank of England is unlikely to lower rates for a second consecutive month at next week’s policy meeting.

The initial reaction to the positive UK labour market news was a bullish impulse for the pound, with GBP/USD rising from around 1.3080 to break above 1.3100 shortly after the release.

However, the pair then retraced towards its “initial levels,” indicating that bulls are struggling to capitalise on the strong data. This could also signal the dominance of bears.

Technical analysis of GBP/USD today points to further bearish signals:

→ The price failed to stay above the previous high around 1.314.
→ A bearish engulfing pattern at the market’s peak (as shown by the first red arrow).
→ A long upper wick on the 6 September candlestick (as indicated by the second red arrow).

Bulls may find support (shown by the blue arrow) from the median of the linear regression channel (in blue). But is this enough to prevent GBP/USD from continuing the downward trend seen since late August and falling towards the channel’s lower boundary?

Much will depend on tomorrow's US inflation data. The Consumer Price Index (CPI) figures will be released at 15:30 GMT+3.

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