GBPUSD: Pound Sterling at Risk of Reaching 1.2677 on Strong NFP Report

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The pound sterling has been volatile over the last few weeks, and the volatility looks to increase as US data has outperformed expectations recently, and the US Non-farm payrolls figures are out this afternoon.

On Friday last week, the GBPUSD pair breached a triangle pattern with a target of 1.3350, however as the dust settled and the new week started, GBPUSD slipped to a new 2020 low. To add to the risk of further declines, the US data reports have been good, with both the ISM Manufacturing and Services PMIs beating expectations. Finally, the US ADP employment report showed that the US economy created 291,000 new jobs vs. the 156,000 anticipated. The better than expected us data has triggered a wave of USD buying in most major FX pairs.

As the markets, now wait for the US NFP report for January, the GBPUSD triggered a breakdown of a rectangle pattern with the levels 1.2942 and 1.3207. The lower level of this pattern was the February 4 low, while the 1.3207 level is last week’s high. The difference between the two levels is 265 pips, and as the price is now trading below the 1.2942 level, the pattern has been completed, and the price might be able to reach the pattern target level at 1.2677. However, as seen in the chart below, traders are hesitating to short-sell ahead of the US NFP report.

If the NFP outcome is higher than the 160,000 anticipated, I suspect that the GBPUSD will slide below yesterday’s low of 1.2917, and the price could be on its way to the 1.2677. However, if the NFP or wage growth fails to meet expectations, we might see the GBPUSD trade back into its price range, and the breakdown would fail.

 

GBPUSD Six-Hour Chart

By Alejandro Zambrano, Editor In Chief at Investingcube.com, and Chief Market Strategist at ATFX.

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