The GBPUSD rallied by +0.58% as the pair experienced relief ahead of the US jobs Data. The dollar lagged behind giving GBPUSD short-term buyers risk-on sentiment with Non-farm Payrolls in focus. Markets are pricing in a lower figure at 200K vs the 263K in the previous month which could see the pair climbing towards the 1.1280 level.
The rise in UK construction PMI data helped lift pound sentiment in the European session amidst recession fears headwinds. The construction data rose to 53.2 vs the 50.5 surveyed. UK Services and Composite PMI data released on Thursday was above expectations giving bulls near-term strength.
However, the bullish gains remain limited as the US dollar remains resilient amidst prospects of further tightening by the Fed. The Fed hiked rates by 75bps to 4.00% on Wednesday and Fed Chairman Powell indicated that the central bank is still far from pivoting. Traders will be closely watching the US Jobs data to carefully weigh Fed tightening trajectory.
The UK GDP and House Price Index data remain key economic drivers scheduled next week alongside US CPI data.
Weekly Chart Analysis
The GBPUSD experienced a sharp pullback after 3-consecutive weeks of gains. The pair traded lower from the 1.16000 level, the previous support-turned-resistance. Bears could target the 1.0975 level in the near term and a break below that level could trigger fresh selling pressure towards the 1.03500 support level.
However, the MACD tool indicates that bullish interests are looming as volume reading trades above the 0.000 neutral level. Bulls would need to defend the 1.0975 near-term support for a fresh rally towards the 1.16000 barriers coinciding with the Bollinger Band Baseline. A break above that level could reinforce further rally toward the 1.2000 and 1.2200 levels.
The ActivTrader Sentiment tool suggests that 55% of retail traders are bullish on the GBPUSD. Traders could be drawing their optimism from the BoE jumbo rate hike on Thursday and quantitative tightening. Moreover, the US dollar faces major headwinds ahead of the US midterm elections starting on Tuesday next week and, a possible drop in Jobs data.
However, downside risks remain following hawkish sentiments by Fed Chair Powell after the release of the Monetary policy decision on Wednesday. The dovish comments by Governor Bailey continue to weigh down the Pound as they forecast a 2-year recession and a peak in interest rates. Moreso, the BoE is shutting the door for another 75bps in December, leaving the market pricing a 50bps.
Daily Chart Analysis
The pair recovered modest gains as bears takes a pause, bouncing off a 1.1150 level. The Stochastic RSI suggests that the pair has currently entered an oversold zone and bulls could rally higher if the 1.1150 level continues to hold. Near-term targets are at the 1.1650 level and 1.2000 if the price manages to break above the 1.1280 level coinciding with a 50-day moving average.
However, Upside gains remain challenged by the 1.1650 level, a 6-week high. A failure to break above that level could see bears dominating the trend towards the 1.0975 level. Extended targets are at the 1.0350 level if GBPUSD drops below the near-term support.