• GBP/USD has been moving sideways after closing in the red on Thursday.
  • The greenback is struggling to gather bullish momentum.
  • US December jobs report could ramp up volatility ahead of the weekend.

GBP/USD has been moving sideways around 1.3550 so far on Friday after closing in the negative territory on Thursday. Investors await the US Bureau of Labor Statistics to release the December jobs report, which could have a significant impact on how markets price the Federal Reserve's policy outlook.

The FOMC's December policy meeting minutes showed on Wednesday that participants saw it appropriate to start the balance sheet normalization process after the first hike. The publication further revealed that current economic conditions, namely the inflation outlook and the state of the labour market, were seen as factors that would allow a faster balance sheet runoff than the previous financial crisis.

The surprisingly hawkish tone of the statement allowed US Treasury bond yields to push higher and helped the dollar gather strength.

The CME Group's FedWatch Tool, used to forecast future policy moves, shows markets are currently pricing in a 63% probability of a March rate hike, compared to 71% on Thursday. This development suggests that investors are waiting for the December Nonfarm Payrolls (NFP) report before continuing to price in a rate increase in March.

The market expectation is for NFP to rise by 400,000 following November's disappointing increase of 210,000. A print close to market consensus should be good enough to for the Fed to stick to its hawkish outlook.

Traders will also pay close attention to the wage inflation reading in the payrolls' report. The Average Hourly Earnings are forecast to edge lower to 4.1% on a yearly basis in December from 4.8% in November. Wage inflation is a greater concern for the Fed as it immediately feeds into more persistent price pressures than a one-month increase in employment and a strong figure could trigger a dollar rally and vice versa.

GBP/USD Technical Analysis

On the four-hour chart, the Relative Strength Index (RSI) indicator stays afloat above 50, suggesting a lack of interest from sellers for the time being.

In case the NFP report provides a boost to the dollar, 1.3500 (psychological level, 50-period SMA) aligns as key support. A break below that level could open the way for additional losses toward 1.3450 (static level) and 1.3420 (100-period SMA).

With regards to upside, interim resistance seems to have formed at 1.3565 (static level) before 1.3600 (psychological level).

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