The Non-Farm Payrolls (NFP) report released last Friday once again exceeded expectations, extending its impressive streak to 14 consecutive positive outcomes. However, a closer examination of the report reveals some less favourable aspects. For instance, the unemployment rate experienced a notable increase from 3.4% to 3.7%, marking the largest month-over-month rise since the onset of the pandemic. Additionally, the average number of hours worked per week saw a decline, which is often an indication of employers reducing hours before initiating layoffs.
Overall, the report presented a mixed bag of outcomes that catered to different perspectives. Optimists focused on the robust job growth but acknowledged the higher unemployment rate and modest average hourly earnings , interpreting them as signs of a less tight labour market that could alleviate inflationary pressures. Meanwhile, pessimists delved into the report's finer details, recognizing that trends hold greater significance than absolute numbers.
In a related development, the US ISM Services Purchasing Managers' Index (PMI) released yesterday fell well below expectations at 50.3, narrowly avoiding contraction territory. The employment sub-index contracted, and the prices paid sub-index experienced a substantial decline, returning to levels last seen in May 2020. As a result, market sentiment shifted, and the likelihood of additional interest rate hikes by the Federal Reserve diminished.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, the GBPUSD looks like topping out in a Head and Shoulders formation with the neckline standing at 1.2306 and a possible target at 1.2000. The moving averages are also crossed to the downside in a further sign that the bearish bias is still intact. The divergence between the tops with the MACD also strengthens the case for more downside to come but the recent fundamental developments made things less clear.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, looks like GBPUSD went back within the old range between the 1.2350 support and the 1.2530 resistance. We had a bottoming out signal when the price started to diverge with the MACD falling right into the 1.2350 support. In fact, the price bounced there and rallied back to the resistance. This rangebound price action around the 1.2444 key level shows that the market is really uncertain on what way to go.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we have a minor support zone at the 1.2415 level. We should see the buyers leaning on this area where we can find also the red 21 moving average as a dynamic support, and target the 1.2530 resistance first and the 1.2680 high if the price breaks out. The sellers, on the other hand, will want to see the price breaking below the 1.2415 zone to pile in and target the 1.2350 support with the 1.2000 level as the ultimate target once the price breaks down.