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Jignesh Davda
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GBP/USD

GBP/USD is an Under Performer in the Week Thus Far

Among the majors currencies, the British pound is the weakest. It has given up just over 1% versus the greenback. Much of the decline this week in GBP/USD is also contributed to a rebound in the dollar as the greenback is up against all of the major currencies with the exception of the loonie.

This can change in the session ahead as traders will be focusing on the latest employment data out of the United States.

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In the last report, the data fell short of expectations with a headline increase of only 75,000 jobs. This is against an expected 177,000 jobs. It wasn’t the first time that the figure fell short this year. In February, there was a jobs gain of a mere 20,000.

I think an important aspect of the report is the average hourly earnings. Last time around, this figure came in at 0.2%, missing expectations for a third consecutive reading. In the year thus far, average hourly earnings has only beaten expectations once and that was in February. I think analysts are optimistic by forecasting a tick up to 0.3%.

An article released by Bloomberg earlier today showed that most banks expect the report to come in line with analyst expectations. The majority of banks listed in the article thought the unemployment rate will remain unchanged and that the headline increase will, in fact, come in close to the predicted 162,000.

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Technical Analysis

I pointed out in yesterday’s forecast that GBP/USD is near a fairly important area in a weekly chart. If it closes here, it will be a worst weekly close in more than two years for the exchange rate.

Also, it would result in a reversal pattern on a weekly chart and I think that can cause more selling pressure next week.

GBPUSD 4-Hour Chart

A weaker US job report can change that, but GBP/USD would need to rally quite a bit at this point for that to happen.

I see support for the pair at 1.2486. This level held it higher on a daily basis in 2018. The pair has already fallen through support at 1.2570 and this level may act as a hurdle on any rally attempts. Bigger resistance is seen at 1.2605.

Bottom Line

  • GBP/USD continues to show weakness and Sterling is the weakest major currency thus far.
  • Support for the pair is seen at 1.2486 in the event of a strong report.
  • Resistance, on a weaker than expected reading, is found at 1.2605.
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