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Jignesh Davda

Earlier Released ADP Figures Set the Stage for the US Jobs Report

The ADP released estimates for the monthly change in employed people on Wednesday. The report showed 27,000 additional workers in May which was the lowest increase in nine years.

The report is likely to soften expectations for the Non-Farm payrolls release tonight. Although at the time of writing, analysts are still expecting an increase of about 180,000 workers. Not too much different from the analyst estimates ahead of the ADP report.

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Average hourly earnings should be an important component of the NFP release. Analysts are looking for a monthly rise of 0.3% in wages after the figure fell short of expectations in the prior two readings.

I think the earnings component will be especially important considering the recent inflation slump. Based on the ADP report it, seems very likely the headline increase will result in a miss, but if the unemployment rate remains steady, an earnings beat stands to underpin the greenback.


Technical Analysis

GBP/USD caught a bid in the early session but seems to have lost momentum near resistance at 1.2714. There is confluence at the level as a 61.8 Fibonacci retracement is found at 1.2720. The retracement is measured from yesterday’s high to low.

GBPUSD 4-Hour Chart

There have been two items of resistance that have been on my radar for most of the week. First is a horizontal level at 1.2744. Its relevance is best seen on a 4-hour chart where it has held price lower since GBP/USD fell below in the second half of May.

Second is the 100-period moving average on a 4-hour chart. One could argue that we are trading above it, but I don’t see a clear sustained break at this point.

In this context, I see support at 1.2689 as critical. It currently holds the 100-period moving average on a 4-hour chart, and on a 1-hour chart, the indicator is converging towards it. It is also a horizontal level that has acted as both support and resistance in recent times.

GBPUSD Hourly Chart

Further support is found at 1.2662. This price point reflects a confluence of a horizontal level as well as the 200-period moving average on an hourly chart.

I consider this area to be the line in the sand for GBP/USD. Although the pair has trended higher for the last week or so, the broader trend remains to the downside. A break below the level could reignite the bearish trend.

Bottom Line

  • GBP/USD needs to scale above 1.2744 to reassert the uptrend
  • Critical support for bulls falls at 1.2689
  • A break below 1.2662 would signal the pair may have reversed
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