GBP/USD: our forecast following December's solid job numbers

Employment data for December 2021 showed a decrease in the number of claimants and the unemployment rate. In December, 29.5 million people were employed in the UK.

The much anticipated December employment report was just released in the UK. Nearly 29 million people were employed in the Kingdom in December, and the change in the number of claimants went from -39.6k to -42.3k people.

This is the number of people claiming unemployment-related benefits, and the lower the number, the better. In addition, the unemployment rate also dropped. It fell to 4.0% from expectations of 4.3%, in another sign of improvement in the labour market.

However, the good economic data failed to impress the GBP/USD pair. Cable rallied to 2022 but was unable to break the series of lower highs seen over the longer time frames.

Sterling revisits the shape of the curve
Technical analysis shows a mixed picture. On the one hand, the pair formed a double top pattern at 1.42 in the first half of 2021 and has corrected since.

In addition, it has continued to form lower lows and lower highs. In addition, it broke the neckline of the pattern and reached the measured move seen at 1.32. In other words, a classic bearish pattern has reached its measured movement.

On the other hand, the measured movement represents only the minimum distance the market must move to confirm the trend. The fact that price action has returned to the neckline suggests that the bulls are fighting for control. However, for price action to turn bullish, the market must close above 1.38, thus invalidating the series of lower highs.

Fed decision weighs heavily
When trading a currency pair, one must consider both sides of the story. For example, not only is the data from the UK important, but also the developments in the US.

All eyes are on the Fed and its message at next week's meeting. With no rate hike expected in January, U.S. dollar traders will be focusing on the central bank's forecasts.