The pound is looking pretty weak against the dollar at the moment, having broken through the key support level of 1.4870, as well as the 50-period SMA on the 4-hour chart few days ago. In addition, the pair is moving inside a downward sloping channel, with the bulls struggling to break above both, the 1.4870 and the 1.4990 levels. A breakout cannot be too far away now with some important data coming out from the US, including the all-important Non-farm Payrolls report, even though markets are closed in observance of Good Friday.
As we can see on the graph below, the ADP report has a poor track record of predicting Non-farm Payrolls and yesterday’s disappointed figure it raises the risk that Friday’s number could be softer than markets are forecasting. Private employers added 189,000 jobs in March, missing expectations for a rise of 225,000. The indicator is lower than 200k for the first time since January 2014, which raises the concerns among the investors. A weak NFP number on Friday, the number of jobs added in both the public and private sector, may put on hold the interest rate hike was forecasted to come earlier. Going forward, the market expects the US jobs report for March to show a gain of 244,000 with the unemployment rate to remain unchanged at 5.5%. In February, Non-farm payrolls beat forecasts and rose to 295,000 jobs, with the unemployment rate falling to 5.5%.
Bearing the above in mind, I would expect to see some more consolidation, with the pair currently finding resistance around 1.4870, which coincides with the 50-period SMA and the upper boundary of the downward sloping channel. A break above the aforementioned obstacles should see the pair attempt to once again break above 1.4990, a key psychological level that it failed to break on its last attempt. If the pair fails to break above 1.4870 today, we should see further pressure on the bottom of the formation, with a break prompting a move back towards a significant support area between the 1.4700 – 1.4740 zone.
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