GBP/USD on track for third straight negative weekly close, 1.30 next?
- GBP/USD erases gains after finding resistance at 100-DMA
- BOE decision and greenback strength are primary reasons behind pair's weekly fall.
- Upbeat PMI data boosts the greenback on Friday.
After closing the previous day 200 pips lower, the GBP/USD pair tried to stage a recovery on Friday but lost its momentum as sellers took control around 1.3130, where the critical 100-DMA is located. As of writing, the pair is trading at 1.3060, virtually unchanged on the day.
Today's upsurge came in after the NFP report from the U.S. disappointed the markets. Although the nonfarm payroll growth rebounded to 261K in October, it fell short of the market forecast of 310K. Moreover, the average weekly earnings remained unchanged on a monthly basis. The greenback weakened against its peers with the initial reaction, bringing the US Dollar Index down to 94.30 level. However, later in the session, the PMI data for the service sector in the United States showed continues growth in activity and helped the buck regather its strength. With the trading volume thinning out towards the end of the week, the DXY is consolidating a little below the critical 95 mark.
On Thursday, the BOE announced its first rate hike in a decade. However, the GBP came under a heavy selling pressure as further details of the BOE's policy statement showed that the bank was planning only two more rate hikes next year rather than the market's estimate of three.
- BoE: A hike ten years in the making - TDS
On a weekly basis, the pair is down nearly 100 pips. With the BOE's decision out of the way, investors will turn their attention to the Brexit negotiations, which Governor Carney pointed out as a primary driver behind their policy moves.
Technical outlook
Mario Blascak, European Chief Analyst at FXStreet writes, "technically GBP/USD must overcome the strong support level of $1.3040 and then the psychological level of $1.3000 to target lower areas of $1.2840 representing the 50% Fibonacci retracement of this year’s uptrend beginning in January and peaking on September 20 this year. Failure to break on the downside should keep the pair treading water around $1.3100 level."
Today's data from the US
- US: Service sector business activity growth remains strong in October - Markit
- US: Total nonfarm payroll employment rose by 261,000 in October
- US: Goods and services deficit at $43.5 bln in Sep, up $0.7 bln from $42.8 bln in Aug
- US: ISM non-manufacturing PMI rises to 60.1 in October from 59.8 in September