GBP/USD Forecast: Bulls turn hesitant ahead of Tuesday's key UK data

GBP/USD consolidates last week's gains, holds above 1.2800.
UK jobs report on Tuesday could significantly influence Pound Sterling's valuation.
1.2850 stays intact as key technical resistance for the pair.

Eren Sengezer FXStreet

GBP/USD rose sharply on Friday and closed the week in positive territory. The pair stays relatively calm early Monday, while moving sideways in a tight range above 1.2800.

After the June jobs report from the US revealed that Nonfarm Payrolls (NFP) 209,000 to miss the market expectation for an increase of 225,000, the US Dollar (USD) came under heavy selling pressure. Consequently, GBP/USD rose sharply and touched its highest level since April 2022 at 1.2851 ahead of the weekend.

Early Monday, the cautious market stance, as reflected by falling US stock index futures, helps the USD hold its ground and doesn't allow GBP/USD to build on Friday's gains.

In the second half of the day, Bank of England (BoE) Governor Andrew Bailey will be delivering a speech. In an interview with BBC on Friday, "I can't give you a date as to when interest rates start to come down because that really depends upon what happens over the period of time ahead, but getting inflation down is the most important thing that we have to do," Bailey said. These comments failed to trigger a reaction in Pound Sterling and Bailey is unlikely to offer any fresh insights into the rate outlook.

On Tuesday, the UK's Office for National Statistics (ONS) will release the labor market data. Investors will pay close attention to the wage inflation reading. On a yearly basis, Average Earnings Excluding Bonus are forecast to rise 7.1% in three months to May. The BoE raised its policy rate by 50 basis points to 5% in June in response to persistent inflation. Hence, a stronger-than-expected wage inflation reading could help Pound Sterling gather strength with the initial reaction, with investors pricing in additional rate hikes later this year.

GBP/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the four-hour chart stays near 60 early Monday, highlighting a lack of seller interest. On the upside, 1.2850 (multi-month high, static level, mid-point of long-term ascending regression channel) aligns as first resistance ahead of 1.2900 (psychological level) and 1.2930 (upper-limit of the ascending channel).

Below 1.2800 (psychological level), GBP/USD is likely to face next support at 1.2770 (former resistance, static level) and 1.2750/40 (100-period Simple Moving Average (SMA), lower-limit of the ascending channel).

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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.

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