Bullish view
– Set buy-stop at 1.2550 and take-profit at 1.2625.
– Add a stop-loss at 1.2400.
– Time frame: 1-2 days.
Bear’s gaze
– Set sell-stop at 1.2480 and 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 fell to 1.2500, from this week’s high of 1.2575. So will the pair rise or fall ahead of Fed minutes and US jobs?
US bond yields rise after strong data
The GBP/USD pair rose after a series of strong economic data from the United States. The ISM report showed that the non-manufacturing PMI rose from 58.2 in November to 64.4, higher than the average estimate of 57.5. Non-production prices rose from 58.2 to 64.4.
These numbers are important because the service sector is the main driver of the US economy.
Another report showed that the economy had over 8.098 million jobs, the highest level in the last 6 months. The increase was also higher than the average estimate of 7.73 million.
The monthly US trade deficit was also lower than expected in November, as exports jumped to $273 billion and imports to $351 billion.
So the strong economic numbers seemed to suggest the Fed would maintain a hawkish tone this year. The bank has already made that U-turn, arguing that the labor market is strong and that inflation is the biggest problem.
The next important catalyst for the GBP/USD pair will be the upcoming Federal Reserve minutes, which will provide more details on the latest meeting. These minutes will come ahead of upcoming US payrolls (NFP) data.
GBP/USD technical analysis
GBP/USD recovered this week, peaking at 1.2575 before reversing to 1.2493. On the 4-hour chart, it moved below the first Woodie pivot point resistance at 1.2550. It also slipped below the 23.6% Fibonacci retracement point and the 50-period exponential moving average.
The pair also moved below the descending trend line that connects the biggest swings since December 12. Also, the Stochastic Oscillator has moved below the overbought level of 80.
Therefore, sterling is likely to 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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