GBP/USD Forecast: Pound Sterling could extend rebound once 1.2200 is confirmed as support

GBP/USD started to move sideways near 1.2200 following Thursday's rebound.
Nonfarm Payrolls in the US are forecast to rise by 180,000 in October.
The pair could stretch higher once 1.2200 is confirmed as support.

Eren Sengezer FXStreet

GBP/USD gathered bullish momentum and climbed to a fresh 10-day high above 1.2220 on Thursday. The pair lost its traction early Friday and went into a consolidation phase at around 1.2200, with investors' attention shifting to the US data releases.

The Bank of England (BoE) left the policy rate unchanged at 5.25% with a 6-3 vote after the November policy meeting. The BoE adopted a cautious tone regarding further policy tightening but noted that risks to inflation projections were skewed to the upside, given the uncertainty created by the events in the Middle East. Although the BoE event failed to impact Pound Sterling's valuation in a significant way, the broad-based US Dollar (USD) weakness allowed GBP/USD to push higher on Thursday.

Later in the day, BoE Monetary Policy Committee (MPC) Member Jonathan Haskel will deliver a speech. Haskel voted in favor of a 25 basis points rate hike and his hawkish comments could support Pound Sterling.

In the early American session, the October jobs report from the US will be watched closely by market participants. Nonfarm Payrolls (NFP) are forecast to rise by 180,000. Fed Chairman Jerome Powell pointed to tight labor market conditions as one of the factors that could allow them to raise the policy rate again this year.

The CME Group FedWatch Tool shows that markets are pricing in an 80% probability that the Fed will hold the policy rate steady for the third consecutive meeting in December. An NFP reading above 200,000 could help the USD shake off the bearish pressure ahead of the weekend and cause the pair to edge lower. On the flip side, a weaker-than-expected growth in NFP could make it difficult for the USD to find demand.

The US economic docket will also feature the ISM Services PMI report for October.

GBP/USD Technical Analysis

GBP/USD was last seen trading in the 1.2190-1.2200 area, where the 200-period Simple Moving Average (SMA) on the 4-hour chart and the Fibonacci 23.6% retracement of the latest downtrend align. Once the pair rises above that area and confirms it support, technical buyers could show interest. In this scenario, 1.2260 (static level) could be seen as the next bullish target before 1.2300 (Fibonacci 38.2% retracement).

On the downside, supports are located at 1.2160-1.2150 (100-period SMA, 50-period SMA) and 1.2100 (psychological level, static level) if the pair fails to stabilize above 1.2190-1.2200.

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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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