GBP/USD outlook: Remains in red but bears face headwinds from daily cloud top

GBP/USD

Cable remains in red in early Friday, following Thursday’s 0.9% drop (the biggest daily loss since Apr 10) as fresh risk aversion deflated sterling.

Bears extended to one-month low but find a footstep at 1.2706 (top of thick ascending daily cloud) and may pause here, as daily studies are becoming oversold and strong negative momentum started to fade.

However, near-term action is likely to remain quiet until release of US labor data, due later today, which would provide fresh direction signals.

US Nonfarm payrolls likely increased by 176K in July, weaker than June’s 206K, which points to slower but still healthy pace of growth, while unemployment and average earnings are expected to remain unchanged at 4.1% and 0.3% respectively.

Higher than expected NFP data in July would cool prospects for further rate cuts and inflate dollar, which would add fresh pressure on pound.

Conversely, sterling would appreciate weaker jobs data.

Penetration and close within daily cloud would add to negative structure and signal continuation of larger downtrend from 1.3044 (July 17 top), with key short-term support at 1.2615 (late June / early July higher base) expected to come in focus.

Broken Fibo support at 1.2779, reinforced by 55DMA, reverted to solid resistance, followed by daily Tenkan-sen (1.2822).

Res: 1.2751; 1.2779; 1.2800; 1.2822.
Sup: 1.2706; 1.2670; 1.2615; 1.2580.

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