GBP/USD drops to 1.3300 ahead of UK jobs report and FOMC

• Pound weakens during US session. 
• GBP/USD drops to test 1.3300.
• Events ahead: UK labor market, US CPI, FOMC, and BoE.

The GBP/USD continued to slide during the US session after being rejected from above 1.3360. The pair reached 1.3300, the lowest level in a week and it was trading at 1.3305/10, headed toward the third decline in-a-row.  

The recovery of the pound was short-lived. On European hours, the pair dropped toward 1.3300 following the release of UK CPI data. The annual rate unexpectedly reached 3.1% (highest in five years), forcing Bank of England Governor Mark Carney to write a letter to Chancellor Hammond. Regarding data, tomorrow will be the turn of the November jobs report. “The UK labor market is set to deliver another proof of strength in November. While the number of people claiming the unemployment benefits is set to increase by 3.4K in November, the unemployment rate is expected to fall further marking another multi-decade low of 4.2% in three months to October period”, said Mario Blascak, European Chief Analyst at FXStreet. Then on Thursday, the retail sales report is due and the Bank of England’s decision. 

In the US, the Producer Price Index climbed to 3.1% above the 2.9% expected and pushed the US dollar modestly to the upside. On Wednesday, CPI data is due and then the FOMC decision with updated projections and Yellen’s press conference. “An unknown factor that could add some chilly to tomorrow's announcement would be inflation figures, to be released earlier on the day. If inflation comes better-than-expected, will reinforce a hawkish stance from policymakers later in the day. A soft reading, on the other hand, will offset any encouraging line the statement may have”, mentioned Valeria Bednarik, Chief Analyst at FXStreet.

The US Dollar rose further during the US session and sent GBP/USD toward 1.3300. The greenback was supported by rising US yields as the Dow Jones climbed to new all-time-highs above 24,500 amid optimism about the tax reform bill. 

Technical levels 

GBP/USD is about to post the first daily close under the 20-day moving average that stands at 1.3335. A confirmation points to more weakness. Below 1.3300, support levels might lie at 1.3265/70 (Aug 3 high) and 1.3230 (Oct 19 & 25, Nov 10 high). On the upside, resistance levels might be seen at 1.3325/30 (Dec 11 high), 1.3380 (Dec 12 high) and 1.3430 (weekly high).