GBP/USD Forecast: Brexit headlines limit British pound's advance
- GBP/USD has been struggling to hold above 1.3600.
- Brexit headlines take the center stage in the absence of high-impact data releases.
- Additional losses toward 1.3500 are likely in case GBP/USD drops below key supports.
The GBP/USD pair managed to register modest daily gains on Thursday but the British pound is likely to feel the weight of the renewed Brexit concerns.
After touching a daily high of 1.3640, GBP/USD reversed its course and was losing 0.2% on the day at 1.3590 at the time of press. Risk flows provided support to the GBP while capping the dollar's upside but investors seem to have taken a cautious stance ahead of the critical US September jobs report. The UK's FTSE 100 Index is virtually unchanged on a daily basis and the S&P 500 Futures are flat near 4,400.
On Thursday, Maroš Šefčovič, Vice-President of the European Commission in charge of Interinstitutional Relations and Foresight, reiterated that they will not be renegotiating the Northern Ireland Protocol. “It's clear there are no easy, quick solutions to complex N. Ireland problems but believe we can find solutions,” Šefčovič added.
Meanwhile, France's Europe Minister - Clement Beaune - said Britain has "failed its Brexit" and added that France could retaliate against the UK over fishing rights.
Ahead of the weekend, the US Bureau of Labor Statistics will publish its highly-anticipated September jobs report. Investors expect Nonfarm Payrolls to rise by 488,000 and see the Unemployment Rate edging lower to 5.1%. An NFP reading near or above the market consensus could allow the bearish momentum to pick up steam as it would confirm the Fed's intention to start reducing asset purchases as early as next month.
On the other hand, a modest GBP/USD recovery could be witnessed on a dismal jobs report. However, a technical breakout could be required to attract additional buyers.
US Nonfarm Payrolls September Preview: How far will markets go when the Fed tapers?
GBP/USD technical analysis
On the four-hour chart, GBP/USD is testing the ascending trend line coming from late September. With a break below that support, the pair could extend its slide toward 1.3550 (50-period SMA) ahead of 1.3500 (psychological level).
On the upside, the initial hurdle is located in the 1.3630/40 area, where the 100-period SMA reinforces the static resistance. Only a daily close beyond that level could be seen as a bullish development that is likely to pave the way for a stronger rebound toward 1.3720 (200-period SMA).
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Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
