GBP/USD Forecast: contained by 1.2200 ahead of US employment data
|The Pound extends its bounce against the greenback, after posting a fresh 7-week low on Thursday at 1.2133, but gains are moderated, with the GBP/USD pair unable to extend beyond 1.2200. The release of mixed UK data has barely affected the pair that remains around 1.2170. According to official releases, the deficit in goods and services in January 2017 was £2.447 billion, pretty much unchanged from December´s 2016 £2.527 billion and slightly better than expected. Industrial production fell by 0.4% in January as expected, and advanced by 3.2% year-on-year, above previous 2.0% but below market's expectations of 3.3%. Manufacturing production also fell in the month, down 0.9%, but the YoY figure came in at 2.7%.
Market players are waiting for the US Nonfarm Payroll report, to decide whether or not, resume dollar's buying. The monthly employment report is expected to beat expectations of 190K, after the ADP survey showed earlier this week that the private sector added 298K new jobs in the month. Also, the unemployment rate is expected to retreat back to 4.7% after up-ticking in January. Wages will also be relevant after January's decline, as strong wages support rising inflation.
From a technical point of view, the GBP/USD pair 4 hours chart presents a limited upward scope, as the price is unable to surpass a bearish 20 SMA, whilst technical indicators have recovered some, but remain within negative territory, with the Momentum indicator lacking directional strength. Much of the upcoming price action will depend on the US report, and how speculative interest understands it.
The immediate resistance is the 1.2200 level, with an acceleration above it on a poor US employment report favoring an upward corrective movement up to 1.2260, the 61.8% retracement of the January rally.
The mentioned multi-week low is the support to follow, as below it, the decline could extend down to 1.2070, en route to 1.2030.
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