GBP/USD Analysis: Bulls looking to seize control ahead of UK data/US CPI/FOMC minutes

The GBP/USD pair witnessed good two-way price moves on Tuesday and finally settled with modest losses for the second successive day. Against the backdrop of hawkish signals by the Bank of England (BoE) officials over the weekend, a mostly upbeat UK jobs report extended some support to the British pound. The UK Office for National Statistics reported that the ILO Unemployment Rate edged lower to 4.5% during the three months to August from 4.6% previous. Moreover, the Average Earnings Including Bonuses surpassed market expectations and showed a 7.2% YoY growth for the reported period. Bulls, however, struggled to capitalize on the move amid the UK-EU stand-off over the Northern Ireland (NI) protocol.

The UK Cabinet Minister and former Brexit Minister Stephen Barclay said that there is recognition on both sides that the protocol needs to work for both communities in NI, but it is not working. This comes after the UK Prime Minister Boris Johnson's spokesman announced on Monday that they will be sharing the negotiating document with the European Commission later in the week. The EU, however, has repeatedly said that they are not willing to renegotiate the protocol. This, in turn, was seen as a key factor that acted as a headwind for the sterling. Apart from this, a late pickup in the US dollar demand prompted fresh selling around the major and contributed to nearly 70 pips intraday slide.

The USD continued drawing support from firming market expectations that the Fed will begin rolling back its massive pandemic-era stimulus as soon as November. The markets have also started pricing in the possibility of an interest rate hike in 2022 amid worries that the recent widespread rally in commodity prices will stoke inflation. Hence, the market focus will remain on Wednesday's release of the latest US consumer inflation figures. The data, along with the FOMC monetary policy meeting minutes, will help investors to gauge the Fed's path on normalizing monetary policy. This, in turn, will influence the near-term USD price dynamics and provide a fresh directional impetus to the pair.
In the meantime, a modest USD pullback from one-year tops assisted the pair to regain some positive traction and climb back above the 1.3600 mark during the Asian session. Traders might take cues from the UK data dump, including the monthly GDP print, for some meaningful opportunities around the major.

Technical outlook

From a technical perspective, the corrective pullback from two-week tops touched on Monday stalled near a confluence comprising of 200-hour SMA and over one-week-old ascending trend-line. The mentioned support, currently around the 1.3575-70 region, should now act as a pivotal point for short-term traders and help determine the intraday momentum. A sustained break below might prompt aggressive technical selling and turn the pair vulnerable to accelerate the fall towards the key 1.3500 psychological mark. The downward trajectory could further get extended towards the 1.3435-30 intermediate support before the pair eventually drops to September monthly swing lows, around the 1.3415-10 region.

On the flip side, any subsequent positive move is likely to confront stiff resistance near the 1.3645-50 region. This is followed by resistance near the 1.3675 zone (weekly tops), above which the pair seems all set to surpass the 1.3700 mark and aim to test the 1.3725-30 resistance zone ahead of mid-1.3700s. Some follow-through buying will negate any near-term negative bias and pave the way for the resumption of the recent bounce from YTD lows touched in September.