GBP/USD has gone into a consolidation phase below 1.1900 in the European session on Friday with trading cation turning subdued ahead of key macroeconomic data releases from the US. The pair's technical outlook doesn't point to a possible recovery in the short term but a disappointing jobs report from the US could help it gain traction.
On Thursday, the monthly data published by ADP revealed that employment in the US private sector rose by 235,000 in December, much higher than the market expectation of 150,000. Combined with the unexpected increase in the ISM Manufacturing PMI's Employment Index and a decrease of 19,000 in the weekly Initial Jobless Claims, upbeat ADP data provided a boost to the US Dollar. The US Dollar Index was last seen trading at its highest level in nearly a month at 105.32, rising more than 1.5% on a weekly basis.
Later in the day, the US Bureau of Labor Statistics will release the December labor market data. Nonfarm Payrolls are expected to rise by 200,000 in December following November's increase of 263,000. The market reaction to the NFP is likely to be straightforward with an upbeat NFP print helping the US Dollar ggather further strength and vice versa.
It's worth noting, however, that markets may have already priced in a strong NFP by longing the US Dollar following the data releases mentioned above. Hence, the market reaction to a better-than-forecast NFP could remain short-lived. On the other hand, markets could reassess the possibility of a 25 basis points Fed rate hike in February if NFP comes in at or below 150,000. In that scenario, GBP/USD could end the week on a firm footing. At the time of press, the CME Group's FedWatch Tool was showing that there is a 43% chance of a 50 bps Fed rate hike at the next meeting.
The Relative Strength Index (RSI) indicator on the four-hour chart stays below 40, suggesting that GBP/USD has more room on the downside before turning technically oversold. Interim support seems to have formed at 1.0870 ahead of 1.1800 (psychological level, static level) and 1.1775 (Fibonacci 50% retracement of the latest uptrend).
On the upside, 1.1900 (psychological level, static level) aligns as first resistance before 1.1940 (Fibonacci 38.2% retracement). If GBP/USD stabilizes above the latter, it could target 1.2000 (psychological level, static level).
On Thursday, the monthly data published by ADP revealed that employment in the US private sector rose by 235,000 in December, much higher than the market expectation of 150,000. Combined with the unexpected increase in the ISM Manufacturing PMI's Employment Index and a decrease of 19,000 in the weekly Initial Jobless Claims, upbeat ADP data provided a boost to the US Dollar. The US Dollar Index was last seen trading at its highest level in nearly a month at 105.32, rising more than 1.5% on a weekly basis.
Later in the day, the US Bureau of Labor Statistics will release the December labor market data. Nonfarm Payrolls are expected to rise by 200,000 in December following November's increase of 263,000. The market reaction to the NFP is likely to be straightforward with an upbeat NFP print helping the US Dollar ggather further strength and vice versa.
It's worth noting, however, that markets may have already priced in a strong NFP by longing the US Dollar following the data releases mentioned above. Hence, the market reaction to a better-than-forecast NFP could remain short-lived. On the other hand, markets could reassess the possibility of a 25 basis points Fed rate hike in February if NFP comes in at or below 150,000. In that scenario, GBP/USD could end the week on a firm footing. At the time of press, the CME Group's FedWatch Tool was showing that there is a 43% chance of a 50 bps Fed rate hike at the next meeting.
The Relative Strength Index (RSI) indicator on the four-hour chart stays below 40, suggesting that GBP/USD has more room on the downside before turning technically oversold. Interim support seems to have formed at 1.0870 ahead of 1.1800 (psychological level, static level) and 1.1775 (Fibonacci 50% retracement of the latest uptrend).
On the upside, 1.1900 (psychological level, static level) aligns as first resistance before 1.1940 (Fibonacci 38.2% retracement). If GBP/USD stabilizes above the latter, it could target 1.2000 (psychological level, static level).