Strong UK jobs data drove GBPUSD to the fifth successive session of gains on Tuesday. The pair was at 1.2791, with intraday gains of 0.2 percent as of this writing, bringing it closer to snapping a four-week losing streak. UK unemployment rate dropped to 4.2 percent in June from May’s 4.4 percent, significantly lower than the forecast rate of 4.5 percent. In addition, Average Earnings Excluding Bonuses rose by 5.4 percent, higher than the forecast 4.6 percent. The figures buttress the pound following the recent weaknesses against the dollar, driven by the BoE’s decision on August 1 to cut interest rates to 5 percent from 5.25 percent.

Underlying inflation risks

Looking forward, the intraday session will be impacted by the release of two key inflation data releases on Tuesday and Wednesday. The US Producer Price Index (PPI) is the first release lined up for Tuesday, while both the UK and the US Consumer Price Index (CPI) data will be out on Wednesday.

Inflation remains a primary concern for both the BoE and the Fed in the second half of the year, amid concern over potential economic contraction. Early this week, BoE’s Monetary Policy Committee (MPC) member Catherine Mann and FOMC’s Michelle Bowman both issued warning about the underlying risks of inflation.

Momentum indicators

On the 4-hour chart, the momentum indicators signal control by the buyers.  First, the price is above the Volume Weighted Moving Average (VWMA). Note that the price faces resistance at the psychological round figure of 1.2800. Also, the Relative Strength Index (RSI) is at 58, adding weight to the upward momentum.

GBPUSD support and resistance levels

The GBPUSD currency pair will likely pivot at 1.2783, and the upside will likely continue if the action stays above that mark. In that case, the first resistance is likely to come at 1.2800. However, if the buyers extend their control, they could break above that mark and built the momentum to test 1.2815. Alternatively, the sellers will likely take control if GBPUSD breaks below 1.2783. That could see the first support established at 1.2772. Similarly, extended control by the sellers at that point will break below that mark, invalidate the upside momentum and potentially test 1.2760.