GBP/USD Forecast: Worries about jobs go both ways, weighing on bulls, all eyes on NFP

GBP/USD has been retreating from the BOE-inspired highs amid Sino-American tensions.
US Non-Farm Payrolls and fiscal stimulus talks are eyed.
Friday's four-hour chart is painting a bullish picture.

Yohay Elam FXStreet

"The furlough program is not sustainable in the long-run" – the words of Rishi Sunak, Chancellor of the Exchequer, provide a reminder that the UK's economic success has its limits., weighing on the pound The UK's unemployment stood at 3.9% in May – the same as pre-pandemic January but it leans heavily on the government paying people most of their salaries while they are at home.

Sunak's comments come ahead of the UK's employment report due out early next week – see preview – and ahead of the US Non-Farm Payrolls – which carry a high level of uncertainty.

America's jobless rate was 11.1% as of June and a minor decline is on the cards for July. Economists expect the world's largest economy to have gained 1.5 million positions last month, yet real estimates have likely declined. ADP's private-sector labor figures and the employment components in purchasing managers' indexes have all shown weakness in hiring.

The NFP could go either way – a gain or a loss of jobs. If the report shows a substantial hit to employment – due to the resurgence of coronavirus – the dollar has room to decline.

See:

Ahead of the jobs statistics, the dollar is gaining ground due to intensifying Sino-American relations. President Donald Trump has hit TikTok and WeChat – two prominent Chinese tech firms – with strict restrictions on their ability to doing business in the US. The administration is worried about the usage of data – and the president would probably like to talk about China and not his mishandling of the virus.

Brexit – another ongoing theme from 2016 alongside Trump – is also back to the headlines. The UK government is allocating £355 million pounds to customs controls between Great Britain and Northern Ireland – a customs border in the Irish Sea. Prime Minister Boris Johnson had been denying the need for such checks and this move is coming under criticism that adds to his woes as the coronavirus crisis continues.

GBP/USD has already more than erased gains related to the Bank of England's optimistic message. The "Old Lady" upgraded its 2020 growth forecasts and hinted negative rates are off the agenda for now. That upbeat tone may return to support sterling once the dust settles from the Non-Farm Payrolls.

All in all, cable bulls have fewer reasons to cheer, but they are not defeated.

GBP/USD Technical Analysis

Momentum on the four-hour chart remains positive, but it has somewhat diminished. Pound/dollar continues trading above the 50, 100, and 200 Simple Moving Averages, and the Relative Strength Index is outside overbought conditions.

Support awaits at the daily low of 1.3085, followed by 1.3055, which is where the 50 SMA hits the price. The next lines to watch are 1.2985 and 1.29.

Resistance is at 1.3070, July's high, followed by a fresh peak of 1.3183 and 1.32. Further above, 1.3270 and 1.3320 are of interest.

More GBP/USD losses momentum at the 1.3165 five-year resistance line – Commerzbank

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

AUD/USD sits at three-week highs above 0.7000 on hawkish RBA-speak

AUD/USD holds a positive bias for the fourth straight day, trading above 0.7000 in the Asian session on Wednesday and at three-week highs. RBA Deputy Governor Andrew Hauser's hawkish remarks and inflation concerns underpin the pair. However, the upside appears capped as the US Dollar attracts some buyers amid looming US-Iran uncertainty.

USD/JPY remains confined in a familiar range below 158.50

USD/JPY sees some dip-buying in the Asian session on Wednesday, though it remains confined within a multi-week range near 158.50 as the uncertainty over the timing of the next BoJ rate hike keeps Japanese Yen bulls on the defensive. Meanwhile, hawkish Fed expectations, bolstered by inflation risks stemming from volatile oil prices, underpin the US Dollar. However, looming intervention fears could limit JPY losses and cap the currency pair.

Gold advances modestly; targets $4,150

Gold prices manage to reverse three consecutive daily declines, trading just below the $4,150 mark per troy ounce on Wednesday. The precious metal’s recovery comes amid a slight drop in the US Dollar, mixed US Treasury yields across the board and a widespread cautious tone from the US-Iran front.

Bitcoin eyes a break above $85,000 as institutional demand returns

Bitcoin edges higher above $83,000, extending its rebound from the 50-day EMA near $80,786. US-listed BTC spot ETFs recorded over $23 million in net inflows on Tuesday, following Monday's $526 million, signaling a return of institutional demand.

What November 3 means for the Fed's rate path and the US Dollar

The USD faces a decisive period ahead of the November 3 midterm elections. While markets anticipate another interest rate increase from the Fed in December, the battle for control of Congress could reshape fiscal policy expectations and, indirectly, the path of US monetary policy in 2027.

The US Dollar fell. Gold didn't rally. That tells you everything

Gold (XAU/USD) is struggling to capitalize on a weaker US Dollar (USD), after repeatedly failing to establish itself above the $4,200 level. The precious metal remains confined to a relatively narrow trading range despite a combination of developments that would normally support higher prices.