GBP/USD, DXY Price, Charts and Analysis:
- GBP/USD It is expected to recover yesterday’s losses and hold above the 100-day moving average ahead of US data.
- Cables emerge from US data, but price dynamics remain volatile. Will there be more clarity in September?
- IG client sentiment shows that retail traders are net long on cable. Given DailyFX’s contrarian view of customer sentiment, will there be more downside?
- To learn more price action, chart pattern and moving averageCheck it out. DailyFX Education Section.
read more: USD Prediction: Will Fed Chair Powell Give More Momentum in Jackson Hole?
GBPUSD has found support at the 100-day MA as the DXY also pauses ahead of the important US data release later today. Cable was making a comeback this week after DXY itself came under selling pressure earlier in the week. Yesterday saw a recovery in the DXY, pulling the cable towards the 100-day moving average.
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Dollar Index (DXY) and US Data Dominate
A lack of influential UK data releases has led the dollar index to lead the cable market this week. The dollar index has been under selling pressure this week as US economic data fell far below expectations, raising hopes that the Federal Reserve’s rate hike cycle would be over.
As we mentioned in our weekly forecast for the dollar, we considered a possible DXY retracement this week. However, it’s important to note that data is still the driving force, sometimes continuing to overshadow the technical landscape.
Dollar Index (DXY) daily chart
sauce: Chart created by TradingView, Zain Vawda
Given the data released so far from the United States, there are signs that the labor market may finally be cooling. Labor data, in particular, showed signs of cooling, with yesterday’s ADP data missing estimates and well below July’s lowest reading since March 2023. Just to be a little clear here, ADP is not necessarily an accurate measure of NFP numbers. As we’ve seen so far this year, there are some pretty big differences. The sheet below provides insight into the differences over the last 12 months or so.
*Note: Data are based on first release and do not account for numerical revisions. However, even with revisions, the data are still significantly different.
Source: Refinitiv data, sheet creator Richard Snow.
That said, it’s important to note that this week’s ADP announcement is in line with the pre-pandemic pace of job creation. “After two years of extraordinary growth in the wake of an economic recovery, we are on track for more sustainable growth in wages and employment as the economic impact of the pandemic recedes,” said ADP Chief Economist Nella Richardson. I am there,” he said.
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Today’s NFP consensus is 170,000, a number well above that, and rising average incomes and a stable unemployment rate could reignite interest among dollar bulls. Bets on rate hikes are likely to rise again, but missing the data downside will likely add more selling pressure to DXY and help cable continue its recent rally.
For all market-moving economic releases and events, DailyFX Calendar
Technical outlook and final thoughts
GBPUSD finally broke out of the August range at the end of last week. Cable has broken below the 100-day moving average, but the move proved short-lived as it recorded a three-day gain earlier in the week and closed inside the August range. August is notorious for being a volatile month for the market as a whole, so this volatile price move is what I expected and discussed in a previous article.
Cable is currently trading just above the 1.2650 mark at the 100-day moving average ahead of the US data release later today. As mentioned earlier, Cable has been driven primarily by the recent DXY move, which we expect to continue today. At the moment, the topside is facing stiff resistance around the 1.2800 handle, where it has struggled throughout August. The 50-day moving average is hovering around the 1.2777 mark and will likely face selling pressure above this level. If it manages to move higher, the next major resistance area will be around the 1.2850 mark.
Alternatively, consider a possible downside break and the first hurdle is the 100-day moving average before the weekly low near the 1.2550 handle becomes the focus. Above 1.2550, the psychological 1.2500 mark faces support, and the 200-day MA may be a region of interest at the 1.2416 handle.
Key levels to watch:
Support level:
- 1.2650 (100-day moving average line)
- 1.2550 (weekly low)
- 1.2500 (mental level)
Resistance level:
- 1.2770 (50-day moving average)
- 1.2850
- 1.3000 (mental level)
GBP/USD Daily chart, September 1, 2023
Source: TradingView, chart created by Zain Vawda
IG client sentiment data
According to IG Retail Trader Sentiment, 55% of traders are currently net long in GBPUSD.
To learn more about changes in GBP/USD sentiment and long and short positioning, download our free guide below.
|
change |
long |
shorts |
OI |
| every day | 13% | -13% | -1% |
| every week | -twenty two% | 13% | -9% |
— By Zayn Vaudha DailyFX.com
Contact and follow Zain on Twitter: @zvawda
