GBP/USD Forecast: Pound turns neutral following bearish correction

GBP/USD has started to move sideways in a relatively tight range at around 1.1300 after having snapped a six-day winning streak on Wednesday. The near-term technical outlook suggests that the pair is likely to stay in a consolidation stage and investors could refrain from making large bets ahead of Friday's highly-anticipated US jobs report.

On Wednesday, the risk-averse market environment helped the dollar gather strength against its rivals. In the second half of the day, the US Dollar Index (DXY) continued to push higher after the monthly report published by the ADP revealed that employment in the US private sector rose more than expected in September. Additionally, the ISM's Services PMI survey showed that employment in the service sector continued to expand and input price inflation continued to rise at a strong pace in September. 

Meanwhile, hawkish Fed commentary reminded investors of the Fed's commitment to stick to its aggressive tightening stance and forced GBP/USD to stay on the backfoot. According to the CME Group's FedWatch Tool, markets are currently pricing in a nearly 70% probability of a 75 basis points rate hike in September.

Nevertheless, safe-haven flows don't seem to be dominating markets early Thursday with US stock index futures trading flat on the day and the DXY struggling to build on Wednesday's gains.

Later in the session, the US Department of Labor's (DOL) weekly Initial Jobless Claims data will be looked upon for fresh impetus. In case the DOL data comes in below 200K, the dollar could regain its traction but the market reaction is likely to remain short-lived. On the other hand, a significant increase of around 50K from the previous week's reading of 193K could trigger a dollar selloff and help GBP/USD edge higher.

It's also worth noting that EU and UK officials are set to restart negotiations on Brexit's Northern Ireland Protocol. Irish Foreign Minister Simon Coveney said on Wednesday said that the UK's willingness to engage in talks this week was welcoming news but added that they were yet to see whether the new government was willing to make compromises and work toward an agreement.

GBP/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the four-hour chart is edging lower toward 50, highlighting the lack of buyer interest in the British pound. In case GBP/USD confirms 1.1300 (psychological level, Fibonacci 61.8% retracement of the latest downtrend) as resistance, it could decline toward 1.1200 (100-period SMA) and 1.1140 (Fibonacci 50% retracement).

On the upside, 1.1400 (200-period SMA) aligns as strong resistance. With a four-hour close above that level, bullish momentum could pickup and GBP/USD could target 1.1500 (psychological level, static level) and 1.1600 (psychological level).