The pound is testing downside resistance levels ahead of UK labor market data!
If you've read our latest Weekly Forex DigestYou will know that the US dollar has found some support as more Fed officials announced that they are in no rush to cut interest rates soon.
Meanwhile, at least two members of the Bank of England (BOE) voted to cut interest rates in May. Shortly afterwards, Bank of England Governor Andrew Bailey warned us that markets might as well under– Pricing the facilitation plans approved by the Central Bank.
GBP/USD 1 Hour Forex Chart by TradingView
The GBP/USD pair, which hit a high above 1.2600 last week, fell to previous support levels of 1.2475. Fortunately for the bulls, a bit of profit taking took the pair back to the 1.2525 area before the end of the week.
Let's see if this week's UK labor market data will support the Bank of England's dovish biases and extend the GBP/USD downtrend. our Event guide to the April UK employment report It suggests we could see upside surprises for the UK labor market.
If the reports are not correct, GBP/USD could attract enough bearish pressure to turn lower from trend line resistance that has been in place since March.
If you look closely, a rejection from the 1.2500 – 1.2525 area could also mean an advance of the head and shoulders pattern on the 1-hour time frame.
This means that downward pressure below 1.2500 or the head and shoulder 'neckline' at 1.2470 increases the odds of GBP/USD reaching new lows in May. The cable could fall to the S1 pivot point line (1.2446) if not to the previous area of interest at 1.2400.
We may not need to wait for the UK release before we see Bear Attack. If more traders price in dovish comments from Fed members from Friday, or if we see a risk-off trading environment, GBP/USD could be rejected from the downtrend line before the UK releases its labor data.
what do you think? Will GBP/USD continue its downtrend this week?