On Thursday, the US Dollar (USD) stretched its gains for a third day against the shared currency (EUR) and the British Pound (GBP) despite higher-than-expected weekly jobless claims data from the US. According to the data released by the Labor Department, the number of people applying for unemployment benefits in the week ended April 29 rose sharply by 17,000 to 274,000. Although the weekly jobless claims turned out to be higher-than consensus estimates, it was still close to a nearly 16-year low level, consistent with the underlying strength of slow but steady recovery trend in the US labor market. Hence, today's payrolls data become even more critical to evaluate possibilities of a June Fed rate-hike. A strong employment data would now raise expectations of a Fed rate-hike, sooner rather than later, and would clearly be dollar supportive.
The GBP/USD pair declined to 1.4444 on Thursday after the Markit/CIPS UK services PMI showed activity in the sector deteriorating further to a 38-month low in April, down to 52.3 from 53.7 in March. Concerns over the impact of a 'Brexit' were clearly visible from this week's PMI data that pointed to deteriorating conditions across various sectors of the British economy. Meanwhile, the EUR/USD pair fell below 1.1400 handle during the NY session on Thursday.
All eyes now turn to today's US NFP data, which is expected to show that the economy added 203,000 new jobs during the month of April. Reading around 200,000 would keep doors open for a Fed rate-hike in June, which would eventually continue boosting the prospects of further recovery for the greenback. Meanwhile, a highly disappointing number would take June rate-hike off the table and USD might resume its downward trajectory.
Technical Outlook
GBP/USD
The pair on Thursday reversed from an immediate strong resistance near 1.4540 but has managed to hold 1.4480 support on closing basis. This 1.4480 area represents 38.2% Fibonacci retracement level of 1.4009-1.4770 sharp up-move and hence, could act as important Pivot point for the pair’s direction in the near-term.
On a sustained break-through 1.4480 support, the pair seems to immediately head towards 1.4415-1.4390 support region, consisting of 20-day SMA and 50% Fibonacci retracement level. Subsequent selling pressure below now seems to open room for a retest of 1.4300 round figure mark support, coinciding with 61.8% Fibonacci retracement level.
Meanwhile on the upside, the pair needs to sustain its strength above 1.4500 level to confirm resumption of the near-term upward trajectory. A convincing move above 1.4500 level could lead to a momentum above 1.4537-40 horizontal resistance, towards reclaiming 1.4600 handle, nearing 23.6% Fibonacci retracement level.
EUR/USD
The pair has already tested its immediate support near 1.1400 level In order to confirm that the pair has peaked out in the near-term, the pair need to extend the corrective move below an important support confluence near 1.1350 level. This 1.1350 level comprises of 20-day SMA and 23.6% Fibonacci retracement level of 1.0522-1.1616 sharp up-swing and hence, a break below this key support should drag the pair immediately towards an intermediate support near 1.1320 level ahead of its next major support near 1.1270 level.
On the flip side, momentum above 1.1420 immediate resistance could get extended April highs resistance near 1.1455-60 area. Only a sustained strength back above April highs would negate any bearish bias and would continue boosting the pair towards its recent daily closing high resistance near 1.1530 level.
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