GBP/USD Forecast: Eyes on US data for next directional clue

GBP/USD holds steady at around 1.2750 following Thursday's rebound.
Nonfarm Payrolls in the US are forecast to rise 225,000 in June.
The pair needs to clear 1.2770 to attract additional buyers.

Eren Sengezer FXStreet

GBP/USD retreated from the two-week high it set at 1.2782 on Thursday but stabilized near 1.2750 on the last trading day of the week. The June jobs report from the US could significantly impact the US Dollar's (USD) valuation and drive the pair's action ahead of the weekend.

After the data from the US showed that the service sector's economic activity expanded at a stronger pace than expected in and that private sector payrolls rose nearly 500,000 in June, the USD started to gather strength against its peers. As a result, GBP/USD declined sharply and erased nearly 100 pips, touching a daily low below 1.2700 in the American session.

Pound Sterling, however, managed to stay resilient against the USD with the 10-year UK gilt yield rising to its highest level since October 2008 at 4.7%. Global bond yields stay relatively quiet early Friday, making it difficult for the pair to find direction.

The US Bureau of Labor Statistics is expected to report an increase of 225,000 in Nonfarm Payrolls (NFP) in June. The Federal Reserve (Fed) is widely anticipated to raise its policy rate by 25 basis points in July. Investors are not yet convinced about the US central bank opting for one more hike after July. A smaller-than-forecast increase in NFP could go against hawkish Fed expectations and weigh on the USD.

Investors will also pay close attention to the action in Wall Street's main indexes. Even if a disappointing NFP print hurts the USD, a risk-averse market atmosphere on growing recession fears could limit the currency's losses.

GBP/USD Technical Analysis

The Relative Strength Index (RSI) on the four-hour chart holds above 50 and GBP/USD trades above the 100-period Simple Moving Average (SMA) currently located at 1.2725, reflecting the lack of seller interest.

Below 1.2725, 1.2700 (Fibonacci 23.6% retracement of the latest uptrend) aligns as key support ahead of 1.2650 (static level) and 1.2630 (Fibonacci 38.2% retracement).

On the upside, static resistance seems to have formed at 1.2770 before 1.2800 (psychological level) and 1.2830 (the end-point of the latest uptrend).

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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