GBP/USD Forecast: To 1.40 or 1.42? All eyes on US Nonfarm Payrolls

• Sterling has succumbed to data and Fed-related dollar strength.
• Nonfarm Payrolls and also worries about the Delta variant are set to move the currency pair.
• Friday's four-hour chart is showing that cable is at crossroads.

Down but not out – that is probably the feeling of GBP/USD bulls after Thursday's blows. The greenback staged a comeback after a trio of US figures beat estimates and as the Federal Reserve seems to be more open to at least talking about tapering its bond buys.

Weekly jobless claims fell to a new pandemic low under 400,000, ADP's reported no fewer than 978,000 private-sector positions last month, raising expectations for Friday´s Nonfarm Payrolls. While the employment component of the ISM Services Purchasing Managers' Index pointed to weaker hiring, the dollar received a boost from the upbeat Prices Paid gauge – showing inflation at its highest since 2005. 

Mounting evidence of an increase in prices seems to be reaching Federal Reserve officials, who could begin a discussion about printing fewer dollars soon. New York Fed President John Williams said that now is not the time to taper bond buys, but perhaps a discussion is warranted. The bank's baby steps toward tightening are causing tremors in markets. 

These developments sent GBP/USD from just under 1.42 to a dip below 1.41, and now it stands at crossroads. Nonfarm Payrolls are projected to show an increase of 664,000 jobs in May, but a wide variety of estimates, mixed leading indicators, and revisions could cause a choppy reaction.

Buy the rumor, sell the fact? A bounce in response to "as expected" figures could be the outcome for EUR/USD, but for the pound, there is additional downside pressure coming from virus variant fears. The Delta strain of COVID-19, the one first identified in India, is causing a spike in UK cases. Moreover, new travel restrictions are also dampening the national mood and may cause consumers to drop.

All in all, the pound seems poorly positioned ahead of the NFP.

GBP/USD Technical Analysis

Pound/dollar has lost the 50 and 100 simple moving averages but is holding above the 200 SMA on the four-hour chart. Momentum is to the downside but the Relative Strength Index is still above 30, thus far from oversold conditions. 

Some support awaits at the daily low of 1.4080, followed by 1.4050 and the all-important 1.40 level, which is a clear separator of ranges. 

Weak resistance is at 1.4130, the daily high, followed by 1.4170, and then 1.42, which was the high point before the drop. Further above, 1.4250, the 2021 peak, looms.