GBP/USD Hovers Near 1.2400 Level Ahead of US Jobs Report

GBP/USD saw some notable price swings yesterday on the back of the Bank of England meeting.

The initial meeting minutes and summary showed that policy members were not looking to ease further, although two members did vote for an additional 100 billion pounds in easing. This brought some optimism to Sterling bulls leading to a brief lift above the 1.2400 handle.

However, Bank of England Governor Andrew Bailey commented that they could ease further if needed which dragged the pair lower to briefly trade at fresh lows not seen since late April.

The pair has stabilized since and shows some potential for a move higher although it may be too early to call a near-term bottom.

Market participants will shift their focus to US economic data as the latest labor market figures are scheduled for release later today.

The mean analyst estimate is for a loss of 22 million jobs in April which is similar to what the weekly jobless claims report have been hinting.

Further, the ADP’s figures on the jobs market showed just over 20 million jobs lost last month.

The unemployment rate is expected to shoot up to 16% from 4.4% last month which would be higher than the peak during the financial crisis when the same figure reached a high of 10%.

Technical Analysis

GBP/USD has a major overhead hurdle at 1.2432 as the level marks a horizontal level that has acted as both as support and resistance over the last month or so.

Further, the level is within close proximity to the 20-day moving average to create a confluence of resistance. It may take a daily close above this level to encourage bulls.

While below 1.2432 resistance, support for the pair is found at 1.2316. The same level held the pair higher yesterday on a 4-hour close basis.

The US dollar index (DXY) reversed lower yesterday and candlestick patterns on a daily chart hint at a potential reversal although the price action surrounding the NFP report might provide a better indication of the near-term direction for the greenback.

Bottom Line

• GBP/USD fell lower following comments from BoE Governor Bailey that signaled the potential for further easing. However, the decline was short-lived and the pair is seen holding in a range.
• US employment data will be released next which could trigger some volatility for GBP/USD if the data deviates from the analyst estimate in a significant manner.