GBP/USD Forecast: Move beyond descending channel resistance to pave the way for further gains

The GBP/USD pair added to the previous session's modest uptick and gained some strong follow-through traction on Tuesday following the release of stronger-than-expected UK jobs report. According to the Office for National Statistics (ONS), the UK Average Weekly Earnings (Including Bonus) recorded a growth of 3.2% during the three months to November as compared to consensus estimates pointing to a modest downtick to 3.1%. The gauge excluding bonuses came in at 3.4% as against 3.5% previous but was in line with market expectations.

Other details showed that the number of people claiming unemployment-related benefits fell to 14.9K in December. Adding to this, the previous month's reading was also revised lower to 14.9K from 28.8K reported earlier, while the unemployment rate held steady at 3.8%. The strong data slightly dented expectations of an interest rate cut by the Bank of England at its upcoming meeting on January 30 and provided a modest lift to the British pound. However, the fact that markets are still pricing in about a 60% chance of a 25 bps rate cut, coupled with fears that Britain might crash out of the European Union kept a lid on any strong follow-through.

Adding to this, a late pickup in the US dollar demand further collaborated towards capping gains for the major. Concerns over the outbreak of the new coronavirus in China triggered a fresh wave of the global risk-aversion trade. The anti-risk flow turned out to be one of the key factors that extended some support to the greenback's perceived safe-haven status against its British counterpart. The pair failed ahead of the 1.3100 round-figure mark and finally settled around 35 pips off daily lows.

The pair managed to regain some positive traction during the Asian session on Wednesday and edged higher for the third consecutive day. The uptick, however, is likely to remain capped amid absent relevant market-moving economic releases, either from the UK or the US. Hence, any incoming Brexit-related headlines might act as an exclusive driver of the broader market sentiment surrounding the sterling and produce some meaningful trading opportunities.

Short-term technical outlook

From a technical perspective, the overnight positive move stalled near a resistance marked by the top end of a three-week-old descending trend-channel. This is closely followed by 200-period SMA on the 4-hourly chart, around the 1.3100 handle, which if cleared might now be seen as a key trigger for bullish traders. Above the mentioned barriers, the pair is likely to accelerate the positive move towards testing its next resistance near the 1.3165-70 region ahead of the 1.3200 round-figure mark. The momentum could further get extended towards mid-1.3200s and the recent swing high resistance near the 1.3285 region.

On the flip side, the 1.3035 horizontal zone now seems to have emerged as immediate support, below which the pair is likely to accelerate the slide back towards the key 1.30 psychological mark. Failure to defend the mentioned support levels might now turn the pair vulnerable to weaken further towards the 1.2960-55 intermediate support before bearish eventually aim towards challenging the trend-channel support – around the 1.2875 zone.