- GBP/USD has topped 1.38 in the latest spell of dollar selling.
- Nonfarm Payrolls could send the overstretched dollar back up.
- Friday's four-hour chart is painting a bullish picture for cable.
Better late than never – that is what pound bulls have been thinking. GBP/USD has finally staged a convincing break above the tough 1.3785 line and the 1.38 round number. It owes to dollar weakness rather than sterling strength.
The greenback suffered three blows of weak data points on Tuesday and on Wednesday. Leading indicators toward Friday's Nonfarm Payrolls – from consumer confidence through ADP's labor figures and to the ISM's manufacturing employment component – have all lowered Nonfarm Payrolls expectations. The dollar dropped in response and later extended its decline.
Thursday's greenback grind is what finally sent GBP/USD higher, allowing it to catch up with other currencies' rallies against the dollar. Nevertheless, there are several issues dogging sterling.
Markit's final UK Services Purchasing Managers' Index for August was downgraded from 55.5 to 55 points, reflecting some weakness in the British economy. Chancellor of the Exchequer Rishi Sunak is set to unveil new taxes, breaking an election pledge by Prime Minister Boris Johnson, who is already under fire for the hasty retreat from Afghanistan.
The most worrying issue for the UK is the persistently high number of COVID-19 cases, which could slow the economy even without new top-down restrictions. Brexit-related shortages of lorry drivers are not helping either.
Circling back to America's jobs report, expectations are low, and that increases the chances of an upside surprise and a squeeze of dollar shorts. The economic calendar is pointing to an increase of 750,000 positions, but the "whisper number" is closer to 700,000. Wages are also of importance, as their rapid increase indicates inflation down the pipeline.
See:
- NFP Preview: How low can the dollar go? Extremely low expectations point to a greenback comeback
- US August Nonfarm Payrolls Preview: Analyzing major pairs' reaction to NFP surprises
- Nonfarm Payrolls August Preview: Sine qua non for the taper
Overall, the dollar may turn back up.
GBP/USD Technical Analysis
Contrary to fundamentals, the four-hour chart is painting a bullish picture. Pound/dollar broke above the 200 Simple Moving Average, the stubborn 1.3785 level and downtrend support. It is also benefiting from upside momentum while the Relative Strength Index remains under 70 – outside overbought conditions.
Resistance awaits at 1.3850, the fresh high. It is followed by 1.3875 and 1.3895, which both capped recovery attempts during August. Further above, 1.3950 and 1.3985 await.
Support below 1.3785 is at 1.3725 and 1.3675, both stepping stones on the way up. The next lines to watch are 1.3635 and 1.36.
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 below 1.0800 after German Retail Sales data
EUR/USD has come under fresh selling pressure and trades below 1.0800 after the data from Germany showed that Retail Sales declined by 1.9% MoM in February. Resurgent US Dollar demand is adding to the downside in the pair. US data are next in focus.
GBP/USD stays weak near 1.2600 amid market caution
GBP/USD remains defensive near 1.2600 in European trading on Thursday. The hawkish tone from Fed Governor Christopher Waller keeps the US Dollar afloat amid a cautious trading environment ahead of key US data releases and the Good Friday trading lull.
Gold price holds strength ahead of US core PCE inflation
Gold price holds onto gains near $2,200 in Thursday’s European session. The precious metal exhibits firm footing ahead of the United States core PCE Price Index data for February, which will be published on Friday.
XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC
XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase.
Portfolio rebalancing and reflation trades emerge into Q2
Yesterday’s price action pointed at a possible end-of-quarter portfolio rebalancing as the session saw the laggards of the quarter like Apple and Tesla gain, and the stars like Microsoft and Nvidia retreat.