GBP/USD: Bears take a breather ahead of US payrolls

The GBP/USD pair created a doji candle yesterday, signaling the bears are having a breather ahead of the US April payrolls and wage growth release.

Note, the doji candle has been created at the 200-day moving average support, so the bears would want to see a convincing move below the key moving average before hitting the market with fresh offers.

Focus on US wage growth figure

The average hourly earnings are seen rising 0.2 percent in April vs 0.3 percent in March. A better-than-expected reading would boost concerns about rising inflation and add credence to the argument that Fed would hike rates at a faster pace. Thus, GBP/USD may find acceptance below the 200-day MA.

On the other hand, an oversold relative strength index (RSI) and the doji candle (bearish exhaustion) would come into play and yield corrective rally if the wage growth prints below estimates.  

• Read: Nonfarm Payroll preview: employment data not expected to impress

Further, the pair would also take cues from the non-farm payrolls number, jobless rate, and labor force participation rate.

The British Pound could also find bids if the Brexit supporters across England, hand PM Theresa May's Conservative party crucial gains in the local elections. As per Business Insider, expectations for Corbyn's party are high but may fall short in the Brexit-voting areas.

GBP/USD Outlook

FXStreet Chief Analyst Valeria Bednarik sees limited upside in GBP/USD even if the US data disappoint expectations.

"In the 4 hours chart, a bearish 20 SMA caps the upside, now around 1.3645, while technical indicators recovered from oversold readings and head higher, but the RSI currently at 34, far from indicating renewed demand for the Pound but barely reflecting the latest correction. This Friday is all about Payrolls, yet even if US data disappoints, chances of a Sterling strong recovery remain well limited."

Support levels: 1.3540 1.3500 1.3465

Resistance levels: 1.3610 1.3645 1.3690