GBP/USD and a Return to Sub-$1.10 in the Hands of US Nonfarm Payrolls

It is a quiet day for the GBP/USD. From the economic calendar. House price figures for September are due shortly. However, the numbers are unlikely to provide the GBP/USD direction as the markets look ahead to the US labor market numbers.

A sharp increase in bets of a 75-basis point Fed rate hike has put the Pound on the back foot. Today’s nonfarm payroll numbers may affirm monetary policy and economic divergence in favor of the greenback.

From the Bank of England, Monetary Policy Committee member Dave Ramsden will speak at the Securities Industry Conference ‘Shocks, Inflation, and the Policy Response.’ Any comments on the economic outlook and the BoE’s next policy move will influence.

GBP/USD Price Action

At the time of writing, the Pound was up 0.05% to $1.11667. A mixed start to the day saw the Pound fall to an early low of $1.11342 before striking a high of $1.11894.

Technical Indicators

The Pound needs to move through the $1.1219 pivot to target the First Major Resistance Level (R1) at $1.1325. However, US economic indicators and FOMC member chatter would need to be Pound-friendly, and the BoE would need to take a hawkish stance to support a return to $1.1300.

In the case of an extended rally, the GBP/USD would likely test resistance at the Thursday high of $1.13833 but fall short of the Second Major Resistance Level (R2) at $1.1490. The Third Major Resistance Level (R3) sits at $1.1761.

Later today, US labor market numbers and Fed chatter will be the key drivers.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.1054 in play. However, barring another extended sell-off, the Pound would likely avoid sub-$1.10 and the Second Major Support Level (S2) at $1.0948.

The Third Major Support Level (S3) sits at $1.0677.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The GBP/USD sits below the 50-day EMA, currently at $1.11979. The 50-day pulled back from the 100-day EMA, with the 100-day EMA falling back from the 200-day EMA, delivering bearish signals.

A GBP/USD move through the 50-day EMA ($1.11979) and the 100-day EMA ($1.12335) would give the bulls a run at R1 ($1.325). However, failure to move through the 50-day EMA ($1.11979) would leave S1 ($1.1054) and sub-$1.10 in play.

The US Session

It is a big day ahead on the US economic calendar. The US labor market is in the spotlight, with September nonfarm payrolls in focus.

A sharp increase in nonfarm payrolls and a fall in unemployment could force the Fed to take a more aggressive path to curb inflation. US economic indicators and Fed chatter have pushed up the probability of a 75-basis point Fed rate hike to 73.1%, up from 56.5% on September 30.

Any bets of a percentage point move would drive the Dollar Spot Index (DXY) back towards 114.

Following today’s stats, FOMC member commentary will also need monitoring.