Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.2000.
- Add a stop-loss at 1.2300.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.2160 and a take-profit at 1.2250.
- Add a stop-loss at 1.2100.
The GBP/USD exchange rate drifted upwards on Wednesday and Thursday morning after the relatively weak private payrolls data. After plunging to a low of 1.2040, the pair rebounded to a high of 1.2170.
US jobs numbers ahead
The GBP/USD pair saw a strong reversal after a series of weak economic numbers from the United States. According to ADP, the private sector added the least number of jobs in September, signalling that the labor market was softening.
The private sector jumped by 89k, lower than the previous month’s 180k. This increase was worse than the median estimate of 153k. Another report revealed that the services PMI dropped from 50.5 in August to 50.1 in September.
These numbers pushed the price of crude oil lower, with Brent and West Texas Intermediate (WTI) falling to $87 and $84, respectively. Also, bond yields retreated sharply from their highest points this week. On Wednesday, the 30-year and 10-year yields dropped to 4.86% and 4.7%.
The same trend happened in the UK, where the long-term gilt yields retreated from their 25-year high of 5.115%.
American stocks also bounced back, with the Nasdaq 100 index and S&P 500 indices rising by 100 and 15 points. Looking ahead, the pair will react to the latest US exports and imports and initial jobless claims numbers.
The US will next publish the latest non-farm payrolls (NFP) data. Economists expect the data to show that the labor market softened in September as UAW workers started their strike. As such, they see the economy adding 163k in September while the unemployment rate remaining at 3.7%.
The GBP/USD pair also reacted to the Tory conference in the UK. One of the biggest outcomes of the event was the decision by Rishi Sunak to scrap HS2 leg to Manchester. The move could have an impact on the economy in the near term.
GBP/USD technical analysis
The GBP/USD bounced back after falling to a multi-month low of 1.2036. On the 4H chart, the pair retested the upper side of the descending channel. It also remains below the 50-period moving average.
The Money Flow Index (MFI) moved to the neutral point of 50 while the pair has moved to the first support of the Woodie pivot point. Therefore, I suspect that the downtrend will continue as bears target the psychological level at 1.2000.
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