GBP/USD: Bears attack 1.3100 amid US dollar pullback ahead of NFP

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  • GBP/USD slips from five-month high amid fresh US dollar buying.
  • Market sentiment turns sour with American deadlock over stimulus, US-China, Washington-Ottawa tussles add worries to market.
  • BOE left monetary policy unchanged with upward revision in GDP but Governor Bailey struck cautious statements.
  • Brexit, coronavirus, aid package can offer intermediate entertainment, US jobs report will be the key.

GBP/USD prints 0.28% loss as sellers cheer the latest drop to 1.3105 while heading into the London open on Friday. Even if American Congress gets adjourned for the week without any decision on the much-awaited stimulus, US dollar gains ahead of the key employment data portray the pair’s weakness. It’s worth mentioning that the BOE’s upbeat performance and worries over the US stimulus helped the Cable to refresh five-month high the previous day.

Democrats and Republicans couldn’t gel even for the benefit of the nation. Though, US President Donald Trump has already threatened to use executive powers to make way for these benefits. The policymakers not only failed to offer details of the much-awaited coronavirus (COVID-19) phase 4 aid package but also disappointed unemployed people over the jobless claims. As a result, the Republican leader of the Senate, Mitch McConnell, pushed policymakers towards attending negotiations for the aid bill during the generally observed August vacation.

Other than the stimulus headlines, the coronavirus (COVID-19) woes and the jitters over the Brexit, not to forget fresh trade war signals, also drag the GBP/USD prices down. Further, the US dollar pullback from over two-year low adds to the pair’s weakness. The US dollar index (DXY) gains 0.32% to 93.09 by the press time. The greenback gauge dropped to the fresh lows since May 2018 the previous day.

On Thursday, the BOE kept monetary policy unchanged with a 0.10% interest rate and held the Quantitative Easing (QE) program unchanged £745 billion. However, the “Old Lady” upwardly revised the GDP figures while also cutting its Unemployment and Inflation targets for the short-term, which in turn helped the quote to remain strong. In doing so, the pair ignores worries conveyed by Governor Andrew Bailey and fresh woes over the London’s financial gateway status.

Market’s risk-tone remains sluggish with S&P 500 Futures declining near 0.50% to 3,330 while stocks in Asia-Pacific also turn red as we write.

Moving on, the July month’s employment data from the US will be the key due to the latest weakness in early indicators. Forecasts suggest the headlines Nonfarm Payrolls (NFP) to weaken to 1600K from 4800K prior whereas Unemployment Rate may ease to 10.5% from 11.1%.

Read: Nonfarm Payrolls Preview: Hints point to an awful July

Technical analysis

Failures to provide a daily closing beyond an eight-month-old resistance line joins overbought RSI and sluggish MACD to direct bears towards 1.3000 round-figures and the weekly low around 1.2980. On the upside, a clear break above the mentioned resistance line, currently around 1.3180 will need validation from the 1.3200 threshold before attacking the yearly top near 1.3265.

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