- GBP/USD has topped 1.38 in the latest spell of dollar selling.
- Nonfarm Payrolls could send the overstretched dollar back up.
- Friday's four-hour chart is painting a bullish picture for cable.
Better late than never – that is what pound bulls have been thinking. GBP/USD has finally staged a convincing break above the tough 1.3785 line and the 1.38 round number. It owes to dollar weakness rather than sterling strength.
The greenback suffered three blows of weak data points on Tuesday and on Wednesday. Leading indicators toward Friday's Nonfarm Payrolls – from consumer confidence through ADP's labor figures and to the ISM's manufacturing employment component – have all lowered Nonfarm Payrolls expectations. The dollar dropped in response and later extended its decline.
Thursday's greenback grind is what finally sent GBP/USD higher, allowing it to catch up with other currencies' rallies against the dollar. Nevertheless, there are several issues dogging sterling.
Markit's final UK Services Purchasing Managers' Index for August was downgraded from 55.5 to 55 points, reflecting some weakness in the British economy. Chancellor of the Exchequer Rishi Sunak is set to unveil new taxes, breaking an election pledge by Prime Minister Boris Johnson, who is already under fire for the hasty retreat from Afghanistan.
The most worrying issue for the UK is the persistently high number of COVID-19 cases, which could slow the economy even without new top-down restrictions. Brexit-related shortages of lorry drivers are not helping either.
Circling back to America's jobs report, expectations are low, and that increases the chances of an upside surprise and a squeeze of dollar shorts. The economic calendar is pointing to an increase of 750,000 positions, but the "whisper number" is closer to 700,000. Wages are also of importance, as their rapid increase indicates inflation down the pipeline.
See:
- NFP Preview: How low can the dollar go? Extremely low expectations point to a greenback comeback
- US August Nonfarm Payrolls Preview: Analyzing major pairs' reaction to NFP surprises
- Nonfarm Payrolls August Preview: Sine qua non for the taper
Overall, the dollar may turn back up.
GBP/USD Technical Analysis
Contrary to fundamentals, the four-hour chart is painting a bullish picture. Pound/dollar broke above the 200 Simple Moving Average, the stubborn 1.3785 level and downtrend support. It is also benefiting from upside momentum while the Relative Strength Index remains under 70 – outside overbought conditions.
Resistance awaits at 1.3850, the fresh high. It is followed by 1.3875 and 1.3895, which both capped recovery attempts during August. Further above, 1.3950 and 1.3985 await.
Support below 1.3785 is at 1.3725 and 1.3675, both stepping stones on the way up. The next lines to watch are 1.3635 and 1.36.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD bounces off lows, retests 1.1370
Following an early drop to the vicinity of 1.1310, EUR/USD now manages to regain pace and retargets the 1.1370-1.1380 band on the back of a tepid knee-jerk in the US Dollar, always amid growing optimism over a potential de-escalation in the US-China trade war.
GBP/USD trades slightly on the defensive in the low-1.3300s
GBP/USD remains under a mild selling pressure just above 1.3300 on Friday, despite firmer-than-expected UK Retail Sales. The pair is weighed down by a renewed buying interest in the Greenback, bolstered by fresh headlines suggesting a softening in the rhetoric surrounding the US-China trade conflict.
Gold remains offered below $3,300
Gold reversed Thursday’s rebound and slipped toward the $3,260 area per troy ounce at the end of the week in response to further improvement in the market sentiment, which was in turn underpinned by hopes of positive developments around the US-China trade crisis.
Ethereum: Accumulation addresses grab 1.11 million ETH as bullish momentum rises
Ethereum saw a 1% decline on Friday as sellers dominated exchange activity in the past 24 hours. Despite the recent selling, increased inflows into accumulation addresses and declining net taker volume show a gradual return of bullish momentum.
Week ahead: US GDP, inflation and jobs in focus amid tariff mess – BoJ meets
Barrage of US data to shed light on US economy as tariff war heats up. GDP, PCE inflation and nonfarm payrolls reports to headline the week. Bank of Japan to hold rates but may downgrade growth outlook. Eurozone and Australian CPI also on the agenda, Canadians go to the polls.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.