GBP/USD: Will bulls retain control above 1.4000 on UK jobs?

Having reached the highest levels since the Brexit vote at 1.4043, the bulls took a breather, prompting a brief phase of consolidation in GBP/USD near 1.4025 region, as investors gear up for the UK jobs report for the next leg higher.

The renewed upside in the spot is mainly driven by broad-based US dollar weakness, in the wake of monetary policy convergence, as expectations of a hawkish ECB decision due tomorrow continue to push the EUR/USD higher. Also, upbeat Eurozone consumer confidence and German ZEW surveys pushed the common currency above 1.23 handle.  The USD index flirts near fresh three-year lows of 89.70 reached last hour.

Moreover, the pound also received a fresh boost from upbeat UK fundamentals after the “public sector finances improved in the month of December thanks in part to stronger VAT receipts and EU credit. The CBI total Trends survey also beat expectations with business optimism and selling prices rising strongly,” Kathy Lien at BK Asset Management explains.

Kathy adds, “Progress is being made on a Brexit deal with members of the European Parliament's negotiating committee noting that UK officials have not objected to anything significant at the latest planning meetings,” which also keeps the buoyant tone intact around Cable.

All eyes now remain on the UK labor market report, with a rise in wages could add extra legs to the rally, driving the major closer towards 1.41 handle, while a corrective slide back towards the 1.3950 barrier cannot be ruled out should the data disappoint.

GBP/USD Technical Levels

Key near-term resistances are aligned at 1.4050 (psychological levels) and 1.4096 (classic R2/ Fib R3). On the flip side, supports are seen at 1.4000 (natural support), 1.3955 (5-DMA) and 1.3916 (Jan 23 low).