GBP/USD Forecast: Set-up favours bullish traders, UK jobs data eyed for some impetus

The GBP/USD pair gained some positive traction at the start of a new trading week and built on Friday's goodish bounce from closer to one-month lows. The uptick seemed unaffected by the latest UK political development, wherein 7 Labour Party MPs confirmed their resignations to form the Independent Group, rather took cues from renewed hopes over a possible extension of the Article 50. This coupled with a follow-through US Dollar pull-back from YTD tops, amid growing optimism over US-China trade talks, remained supportive of the up-move to an intraday high level of 1.2939. 

Meanwhile, the European Union reiterated that the Brexit withdrawal agreement is not open to negotiations nor they can provide legally binding changes to the backstop and eventually kept a lid on any strong follow-through. Moving ahead, market participants will keep a close eye on a meeting between the UK Prime Minister Theresa May and the European Commission President Juncker in a last minute attempt to re-negotiate the Brexit deal, which should play a key role in determining the pair's next leg of a directional move. 

In the meantime, today's release of UK monthly employment details will be looked upon for some short-term trading impetus. The number of people seeking unemployment related benefits are anticipated to come in at 2.4K in January, down from the previous month's reading of 20.8K and the unemployment rate is seen holding steady at 4.0%, while average earnings (including bonus) are expected to have ticked higher to 3.5% 3mo/yr rate from 3.4% previous. Also in focus will be a new round of US-China trade talks, which might influence sentiment surrounding the USD and also produce some meaningful trading opportunities.

Meanwhile, given the recent break through a 2-1/2 week old descending trend-channel, the technical picture now seems to have tilted in favour of bullish traders. Hence, any meaningful retracement is likely to find decent support, rather seen as a buying opportunity and should limit any further downside near the channel resistance break-point, around the 1.2855-50 region. Failure to defend the mentioned support might accelerate the fall back towards the 1.2800 handle, below which the pair is likely to turn vulnerable to aim towards challenging the 1.2700 round figure mark with some intermediate support near the 1.2750-45 zone.

On the flip side, the 1.2940-50 region now seems to act as an immediate resistance, which if cleared should assist the pair to aim towards reclaiming the key 1.30 psychological mark, also nearing the very important 200-day SMA. A strong follow-through buying might negate any near-term bearish bias and pave the way for a further near-term appreciating move.