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GBP/USD Daily Forecast – Sterling Holds Steady Below 1.30 Awaiting NFP Report

By:
Jignesh Davda
Published: Nov 1, 2019, 10:31 UTC

After a technical break higher earlier in the week, GBP/USD has been trading sideways as investors await the latest US unemployment report.

GBP/USD

GBP/USD Underpinned by a Weak Dollar

The British pound gained against all of its counterparts in the early part of October, driven by the prospects of Brexit deal. While an EU exit has been pushed back, the pound to dollar exchange rate continues to see a strong bid.

A weaker dollar has been a big part of the reason why GBP/USD remains firm. There is also optimism that UK PM Johnson will win a majority in Parliament and push through a deal in January.

But let’s focus on the dollar and its performance in October. The trade-weighed dollar index (DXY) posted a high at the start of October and has pretty much declined ever since. DXY posted a monthly loss just over 2% in October which was it’s largest single-month decline since January 2018. EUR/USD, which carries a strong inverse correlation with the dollar index, is hovering near a nine-week high. So a theme of dollar weakness is certainly prevalent.

Today’s jobs report might cause a continuation in that theme if figures come in less than expected. Analysts have set the bar a bit low with expectations for 90 thousand new jobs in October versus the 136 thousand new jobs created in the month prior. The unemployment rate is also said to tick up although a significant rebound is expected in average hourly earnings. The expectation figures suggest that analysts are not too optimistic about the US economy at the moment.

Technical Analysis

GBP/USD broke higher from a bullish flag pattern earlier in the week to set a positive tone. This pattern had contained price action from a high printed at the start of last week. The upside breakout lends a bullish bias.

GBPUSD 4-Hour Chart

There is a horizontal level at 1.2924 that is in play. It offered support on a dip yesterday to keep GBP/USD within a range. While above it, I expect the pair will try and make another run for recent highs.

In the event the pair falls below support, I would look for a retest of the flag pattern, roughly around the 1.2850 area.

Bottom Line

  • GBP/USD holds firm ahead of the US jobs report.
  • Support for the pair resides at 1.2924.
  • An upward break from a bullish flag pattern earlier in the week signals more upside for the exchange rate.

About the Author

Jignesh has 8 years of expirience in the markets, he provides his analysis as well as trade suggestions to money managers and often consults banks and veteran traders on his view of the market.

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