GBP/USD Forecast: Pound powerless against Powell, Nonfarm Payrolls could deliver extra punch

Britain's new budget has been well received by investors and the country's vaccination campaign is hailed as a success – but nothing can match the Federal Reserve's firepower. That is especially true when the world's most powerful central refuses to budge. 

Jerome Powell, Chairman of the Federal Reserve, said that the rapid rise in bond yields has "caught my attention" – but nothing else. Otherwise, he stuck to the script of dismissing prospects of rising inflation, saying that the Fed eyes various measures of financial conditions and stressing that ten million Americans remain out of work. 

See Powell Analysis: Markets set to suffer for two more weeks as Fed mostly dismissed bond rout

The reaction in markets is since felt in full force – US ten-year Treasury yields have soared above 1.55%, carrying the dollar higher. GBP/USD dropped toward 1.38 and the bottom seems out of sight. 

While markets continue digesting Powell's reluctance to help, they will have to quickly shift to the Nonfarm Payrolls. The economic calendar is pointing to an increase of 182,000 positions in February, while several leading indicators such as ADP's labor figures and the ISM Services Purchasing Managers' Index point to even lower results. That means a minor beat would be sufficient to boost the greenback even further.

• US Nonfarm Payrolls February Preview: The inflection point
• Nonfarm Payrolls Preview: Dollar booster? Three expectation downers pave way for upside surprise

In the meantime, the Senate continues discussing President Joe Biden's now-modified covid relief package. While the total bill will fall short of $1.9 trillion, it would serve as a boost to the economy. 

The pound remains supported via the vaccination campaign – nearing a third of all Brits – and the upbeat forecasts in the budget. However, while sterling has room to rise against many other currencies, it seems powerless against the dollar.

GBP/USD Technical Analysis

Pound/dollar is suffering from downside momentum on the four-hour chart and has fallen below the 200 Simple Moving Average. Moreover, the Relative Strength Index is still above 30, thus outside oversold conditions. 

Some support awaits at the daily low of 1.3810, and then at 1.3775 and 1.3750, lines that were in play earlier in the year. The downside target is 1.3680.

Resistance awaits at 1.3860, followed by 1.3880 and 1.3930.