Looking for trade ideas to start the week?
GBP/USD is trading around the 1.2500 major psychological handle ahead of the U.K.’s jobs report release.
Will the report and this week’s market themes inspire traders to extend GBP/USD’s months-long downtrend?
Let’s take a look at the 1-hour chart for clues.
GBP/USD 1-hour Forex Charts by TV
If you’ve read the latest FX Weekly Recap, then you’ll know that the U.S. dollar made pips from the U.S. economic reports supporting a hawkish bias for the Fed.
Meanwhile, the British pound was weighed (heh) by BOE Governor Andrew Bailey saying that they’re over their uber-hawkish phase and that monetary policy is now “restricted in its impact.”
We could see more of the same pro-USD, anti-GBP themes play out this early in the week.
In a bit more than a day, the U.K. is expected to print July labor market numbers that are weaker than their June readings. So, unless wage growth wildly surprises to the upside, then Tuesday’s U.K. jobs data may support the BOE’s shifting biases and attract GBP/USD bears.
Renewed GBP selling may bust GBP/USD from its current short-term range. As you can see, Cable is ranging between the 1.2500 – 1.2600 zones while taking a breather from its months-long downtrend.
Depending on where GBP/USD is during the report’s release, we could see the pair (a) turn lower from its mid-range level near the Pivot Point line, (b) find resistance from the 200 SMA area near 1.2580, or (c) we could see a downside breakout from its current range.
Keep in mind that, in the last two U.K. jobs data releases, GBP has seen pullbacks before extending its intraday trend. This means that a break-and-retest strategy may be an option if you’re planning on trading a possible breakout.
If we see a pro-USD or risk-averse trading environment, then GBP/USD may attract enough bears to hit new September lows. I got my eyes on the 1.2400 psychological handle but GBP/USD may also see buying pressure at 1.2450.
What do you think? Will this week’s USD-buying and weak U.K. jobs expectations be enough to extend GBP/USD’s downtrend?