Bullish view
- Set a buy-stop at 1.2550 and a take-profit at 1.2625.
- Add a stop-loss at 1.2400.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.2480 and a take-profit at 1.2400.
- Add a stop-loss at 1.2600.
The GBP/USD pair retreated in the overnight session as US bond yields jumped following strong US economic data. It dropped to 1.2500, down from this week’s high of 1.2575. So, will the pair rise or fall ahead of the Fed minutes and US jobs numbers?
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US bond yields rise after strong data
The GBP/USD pair rose after a set pf strong economic data from the United States. A report by the ISM showed that the non-manufacturing PMI rose from 58.2 in November to 64.4, higher than the median estimate of 57.5. No-manufacturing prices rose from 58.2 to 64.4.
These numbers are important because the services sector is the main driver of the American economy.
Another report showed that the economy had over 8.098 million job openings, the biggest level in over 6 months. The increase was also higher than the median estimate 7.73 million.
The US monthly trade deficit was also lower than expected in November as exports jumped to $273 billion and imports soared to $351 billion.
Therefore, the strong economic numbers appeared to suggest that the Fed will maintain a hawkish tone this year. The bank has already made that pivot, arguing that the labor market was strong and that inflation was the biggest issue.
The next important catalyst for the GBP/USD pair will be the upcoming Federal Reserve minutes, which will provide more details about the last meeting. These minutes will come ahead of the upcoming US nonfarm payrolls (NFP) data.
GBP/USD technical analysis
The GBP/USD exchange rate recovered this week, topped at 1.2575, and then reversed to 1.2493. On the four-hour chart, it has moved below the first resistance point of the Woodie pivot point at 1.2550. Also, it has slipped below the 23.6% Fibonacci Retracement point and the 50-period Exponential Moving Average.
The pair also moved below the descending trendline that connects the highest swings since December 12. Also, the Stochastic Oscillator has moved below the overbought level of 80.
Therefore, sterling will likely remain in this range for the most part and then show some volatility ahead of the upcoming Fed minutes. In this case, the next key support and resistance levels to watch will be at 1.2400 and 1.2600. A move to 1.2600 will be confirmed if it moves above the first support at 1.2550.
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