GBPUSD – Technical Outlook

US Nonfarm Payrolls

Nonfarm Payrolls measure the change in the number of people employed during the previous month, excluding the farming industry. Job creation is the leading indicator of consumer spending, which accounts for most economic activity.  The last NFP was 263K, better than the forecast of 200K.

The report is due Friday, 5 January 2023, at 13:30 GMT.

Technical Analysis Daily Time frame

Moving Average(MA):

The price was trading below the 200MA and above the 50MA. However, recently the price crossed the 200MA and is moving down. There is no recent crossover seen on the higher timeframe thus singling bullish pressure in the market.

Relative Strength Index(RSI):

The RSI line is at the 44.86 zone signaling neutral overbought and oversold condition. There was a hidden bearish RSI divergence seen in the higher time frame during Oct 2022.

Analysis using price action:

Looking at the chart of GBPUSD on the higher time frame, we see the market was in a downtrend until 4th Oct 2022. In six consecutive trading sessions, the price then shot up 10.38% from the bottom of $1.03595 to $1.14902. The price seemed bullish here, went into a corrective state, and formed a new swing low at $1.09234 and a higher low. Hereafter the price started to trade inside a bullish channel by forming higher highs and lows.

The price crossed above the 50 moving average on 7th Nov 2022, signaling bullish pressure. After this, the price rose drastically, breaking the higher highs. The price was trading below the 200MA until 1st Dec when the 200MA was breached. However, the price couldn’t hold up much and started to slide down and form a major swing low.

If the price breaks the bullish channel, it might hit the hurdle price of $1.17380, which is a crucial level acting as a support. However, if the price stays inside the channel, it may trade higher, with $1.24571 being a resistance level.

Potential pivot points using Price Action:

This considerable resistance and support level can enter or exit when approaching future market openings.

Key Trading Recommendation

NFP numbers are a key metric indicating the growth or shrinkage of the job market. Although, November’s numbers surpassed the forecast, it was still a decline from October’s number.

Traders should avoid entering positions during these news events since the market will have higher-than-average volatility, meaning that currencies could move in either direction without a definite trend for a short while.

Vantage does not represent or warrant that the material provided here is accurate, current, or complete, and therefore should not be relied upon as such. The information provided here, whether from a third party or not, is not to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any financial instruments; or to participate in any specific trading strategy. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. We advise any readers of this content to seek their own advice. Without the approval of Vantage, reproduction or redistribution of this information is not permitted.