GBP/USD Falls Back From 1.3150 Resistance as the US Dollar Recovers

GBP/USD has eased lower after a couple of attempts to scale above 1.3150 resistance last week. The bearish move followed a better than expected jobs report from the US on Friday.

The Non-Farm payroll data, weekly unemployment claims, and the ADP report all had positive elements to it which appears to have halted the dollar decline, at least for now.

At this stage, it would not be surprising to see GBP/USD fall into a range, especially considering the outsized bullish move in July.

The pair will likely be influenced by GDP data that will be released later in the week. Analysts expect GDP contracted 20.5% in the second quarter. On a month over month basis, June is expected to show a recovery with growth of 8.1% following 1.8% growth in May and a notable 20.4% contraction in April.

Aside from UK data, traders will also be paying attention to the latest CPI and retail sales figures from the US, scheduled for release on Wednesday and Friday.

GBP/USD has had a strong correlation with the equity markets since March and this is something to be mindful of. The S&P 500 rallied last week to close the gap from back in February. The index is at notable resistance, if it pulls back, GBP/USD might follow it lower.

Technical Analysis

GBPUSD 4-Hour Chart

From a broader perspective, GBP/USD has important resistance at 1.3150 and 1.3200, both stemming from the larger time frames.

While these hurdles could cap near-term gains, the momentum-driven bullish trend since last month stands to keep the pair bid on dips. The end results might be a range for the currency pair.

The US dollar is attempting to extend on Friday’s gain but the upward momentum has slowed with the trade-weighted index showing only a marginal gain in the early day.

If GBP/USD continues to head lower, further support is found at 1.2959. It might take a break of either this level or 1.3150, to get a clearer view of the near-term trend.

Bottom Line

  • The US dollar has gained some recovery momentum following better than expected jobs data last week.
  • While GBP/USD is likely to remain bid on dips as a result of the firm move higher in July, upside momentum may slow with major overhead resistance coming into play.

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