GBP/USD, the Pound Sterling against the us Dollar, aka Cable, is under continued pressure. By the close of the markets on Wednesday, the GBP/USD cross was trading at approximately 1.3455. The currency pair now represents roughly 11% of all of the foreign exchange markets. At the moment, it’s riding the wave of positive sentiment as the market apparently awaits the next US Nonfarm Payrolls (NFP) figures for December. Last year, we set great expectations for labor market transparency. It might determine upcoming currency fluctuation trends.
The US Dollar has been otherwise trading very firmly, with the US Dollar Index (DXY) above 98.21 approaching a four-week high at 98.86. This strength contrasts with the British Pound’s performance amidst concerns regarding the Bank of England’s (BoE) monetary policy, which is projected to maintain a gradual downward trajectory. Industry players with an interest in the GBP/USD exchange rate are watching these changes very carefully as they look to gauge the likely impact on GBP/USD.
Current Market Conditions
GBP/USD is holding just under 1.3455 as we look forward today. Yet, it is exhibiting weakness as it flirts near the 20-day Exponential Moving Average (EMA) at 1.3443. It’s no surprise that this particular technical indicator is so important to traders, since it helps clearly outline current short-term trends. A daily close below this EMA would increase the likelihood of continued retracement toward the next support at 1.3310.
The 14-day RSI is at 54.51. This means that the currency pair is neither overbought nor oversold, and it is a well-balanced currency pair so far. Traders appear to be in wait-and-see mode. They’re playing a “show-me” game, hoping for more confirmation from still-embryonic economic data before making any major transitory commitments.
The ISM Services Purchasing Managers’ Index (PMI) data for December surged to 54.4. This big jump is a sign of just how strong the US economy really is. Increased interest rate sensitivity among firms, reflected in the latest ADP Employment Change report, was a bright spot pointing to a strong rebound in private employment. In December, they cut 41,000 workers. These upward signals could fuel hopes for a strong NFP print, thus boosting the US Dollar even more.
Technical Analysis and Levels to Watch
Traders had an eye on GBP/USD’s next important technical levels which could determine the pair’s [direction](https://trader.wiki/GBP) moving forward. The tiring pair has another important Fibonacci retracement level at 1.3491 which is the 61.8% retracement from a two-and-a-half year bearish move. A breakout above this level could extend any potential rebound towards the next resistance level at 1.3623, corresponding to the 78.6% Fibonacci retracement.
If GBP/USD fails to stay above the 20-day EMA at 1.3443, it might set off a decline. Such a decline would likely find the currency pair revisiting support at 1.3310. Dollar traders may respond bearishly to the surprise NFP data. Conversely, the larger macro environment might turn to a more bullish outlook for the US Dollar.
GBP/USD has been among the top traded currency pairs in the world. Despite being a small currency, it represents around 12% of all transactions, so it’s the go-to currency for FX market participants. Its movements are closely linked to economic indicators from both the UK and US, making it imperative for traders to stay informed about current events and economic releases.
Outlook for GBP/USD
Moving forward, foreign exchange analysts are forecasting continued volatility for GBP/USD as the market responds to data releases and signals regarding monetary policy from the central banks involved. The Bank of England’s use of monetary policy is now under intense scrutiny. Most experts are in agreement it will keep following that downward trend slowly. New details from the incoming Gov’t are expected to further impact investor sentiment against the British Pound in waiting weeks.
As market participants await the release of the US NFP data, speculation surrounds how it might affect future interest rate decisions by the Federal Reserve and subsequent implications for GBP/USD. An exceptionally positive employment report could stoke bullish US Dollar sentiment. Conversely, any weak data could provide at least a short-term support for Sterling.