GBPUSD is trending higher on its 4-hour chart and looks prime for a pullback to the ascending trend line. Applying the Fib tool on the latest swing low and high shows that this lines up with the 61.8% retracement level around the 1.3450 minor psychological mark.
The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. In addition, these moving averages are close to the trend line support, adding to its strength as a floor.
Stochastic is on the move down to indicate that sellers have the upper hand for now, which suggests that the correction could go on for a while. Once the oscillator hits oversold conditions and turns back up, buyers could return.
UK economic data has actually been downbeat so far this week, with both the manufacturing and construction PMIs falling short of consensus. The former fell from 58.2 to 56.3 while the latter slipped from 53.1 to 52.2. The services PMI is due next and an improvement from 53.8 to 54.1 is eyed.
Meanwhile, the dollar has managed to shake off its downbeat start for the year when the FOMC minutes confirmed that gradual rate hikes are in the cards. As in previous meetings, policymakers expressed concerns about inflation, but several cited that the strength in the jobs market could buoy price levels higher.
The NFP report could also be an event risk for the dollar as a weaker than expected read could once again undermine Fed rate hike hopes. The jobs component of the ISM manufacturing PMI showed a decline for December and traders are waiting on today’s ADP employment change data next. Analysts are expecting to see a climb from 190K to 191K.