GBP/USD Trading at Key Resistance Ahead of the NFP Report

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GBP/USD Trading at Key Resistance Ahead of the NFP Report

The GBP/USD started the year bearish, but turned choppy after testing 1.51. Then if broke lower to 1.4950 but remained choppy, and ended up in further consolidation as we can see in the 4H chart.

GBP/USD 4H Chart 2/4
gbpusd 4h chart 2/4
(click to enlarge)

Consolidation Resistance: The 4H chart shows that price started this week respecting the 1.50 handle, rallying to 1.5250 today before finding some resistance. Note the month-long resistance pivot at 1.5270 and the 200-period SMA just under that.

ADP Jobs Report: During the 2/4 US session, the main fundamental factor was the ADP non-farm employment change report. It showed 213K jobs added to the economy in January, compared to the 253K in December. Forecasts called for a reading around 224K, so this was a slight disappointment.

ADP NFP 2/4
(click to enlarge: source: ADP)

This report is discouraging in light of the positive assessment and expectations that the Fed has on the economy in 2015. Traders might start doubting the FOMC’s economic projections if jobs data doesn’t push higher in February.

NFP Jobs Report Ahead: The next key release will be Friday’s NFP jobs report, which should have more impact than today’s ADP jobs report. If it also disappoints, the GBP/USD has a good chance of breaking above the current resistance in the 1.5250-1.5270 area. It will probably need to be very disappointing, because as the daily chart will show, the 1.5270-1.53 area is also reinforced by a falling trendline, coming down from the July 2014-high at 1.7190.

US NFP (Jan.)
Forecast: 231K
Previous: 252K

GBP/USD Daily Chart 2/4
gbpusd daily chart 2/4
(click to enlarge)

Let’s stick with the disappointing NFP scenario. A reading near or lower than 200K should give the GBP/USD a boost to break 1.5270 and even 1.53. Then, the next resistance levels will be 1.5485 and 1.5620.

We should keep the bullish outlook contained and look for resistance as price approaches 1.55, especially if the RSI in the daily chart also approaches then stalls around 60.

Now, if price fails to break above 1.53, and falls back below 1.5140, the prevailing downtrend would still be intact, and the pressure would return towards the 1.4950 low with risk of breaking lower. This would likely be the case if the NFP does not disappoint or is slightly better-than-expected, such as a reading above 250K.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.