- GBP/USD has managed to stretch higher toward 1.1950 early Friday.
- The pair faces strong resistance area at around 1.2000.
- The market positioning suggests that investors are undecided about the next Fed action.
GBP/USD has preserves its recovery momentum and advanced to the 1.1950 area early Friday after having managed to close above 1.1900 on Thursday. The pair's technical outlook points to a bullish tilt in the short term but investors are likely to ignore the technical readings when assessing the US February jobs report.
The US Dollar (USD) failed to benefit from the negative shift witnessed in risk sentiment on Thursday and the US Dollar Index lost nearly 0.4%. The worse-than-expected weekly Initial Jobless Claims data and the 2% decline in the benchmark 10-year US Treasury bond yield seem to have made it difficult for the USD to attract investors.
Meanwhile, the market positioning, as reflected the CME Group's FedWatch Tool, suggests that investors are not yet certain that the US Federal Reserve will opt for a bigger rate hike at the next policy meeting. The probability of a 50 basis points (bps) rate increase, which stood above 70% after FOMC Chairman Jerome Powell said that they were prepared to increase the pace of rate hikes, returned to 52% early Friday.
Hence, the USD is likely to have a strong reaction to an unexpected Nonfarm Payrolls (NFP) print.
In February, NFP is forecast to rise by 205,000. With a significant downside surprise - a reading in the range of 50-100K, markets could start repricing a 25 bps rate hike in March and trigger a sharp decline in the US Dollar Index. On the other hand, an NFP figure close to 300,000 should confirm a 50 bps rate increase and provide a boost to US T-bond yields and the US Dollar, causing GBP/USD to come under heavy bearish pressure.
In case headline NFP doesn't offer a considerable surprise, market participants are likely to pay close attention to wage inflation. Average Hourly Earnings are forecast to rise to 4.7% on a yearly basis from 4.4% in January. A hotter-than-expected wage inflation print should cause investors to lean toward a 50 bps hike and vice versa.
GBP/USD Technical Analysis
1.2000 (100-day Simple Moving Average (SMA), 100-period SMA on the four-hour chart, psychological level) aligns as important resistance for GBP/USD. In case buyers manage to flip that level into support, additional gains toward 1.2050 (static level) and 1.2100 (psychological level, 200-period SMA) could be witnessed.
On the downside, 1.1930 (static level) is first support before 1.1900 (psychological level, static level) and 1.1850 (static level).
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD drops toward 1.0700 after US jobs report
EUR/USD came under renewed bearish pressure in the second half of the day on Friday and declined toward 1.0700. Stronger-than-expected Nonfarm Payrolls (NFP) data helps the US Dollar gather strength ahead of the weekend and forces the pair to stay on the back foot.
GBP/USD extends slide below 1.2450 amid a stronger USD
GBP/USD dropped further and hit fresh daily lows below 1.2450 amid a stronger US dollar. The Greenback remains firm following the release of the US May jobs report. Despite losing almost 100 pips on Friday, GBP/USD is still on track for a weekly gain.
Gold falls below $1,960 as US yields rebound after US jobs data
Gold price turned south and declined below $1,960 on Friday. After the data from the US revealed that Nonfarm Payrolls rose 339,000 in May, the benchmark 10-year US Treasury bond yield gained more than 2% and recovered toward 3.7%, weighing heavily on XAU/USD.
Terra Classic price up 35% as whales buy LUNC for v2.1.0 parity upgrade
Terra Classic (LUNC) has turned bullish, inspired by a recent announcement of the version 2.1.0 upgrade. The news has awakened the altcoin from a deep slumber, inspiring hope among token holders as the nominal increase shows signs of sustaining long-term for the token.
Week ahead – RBA and BoC to hold rates but might be tempted to hike
Policy decisions from the RBA and the Bank of Canada will be taking centre stage next week amid an otherwise light agenda. In the US, the ISM services PMI will be the only top-tier release and now that Congress has averted a default by suspending the debt ceiling.