GBPUSD: More Downside Ahead Following the Impressive US NFP Report. Here’s Why.
GBPUSD has been virtually unchanged from its opening price thus far in today’s trading. As of this writing, the currency pair is trading around 1.2463. However, technicals suggest that GBPUSD may soon fall by as much as 100 pips!
Yesterday, the June NFP report instilled confidence among market participants that the US economy is recovering. Job growth for the month clocked in at 4.8 million which was more than the 3.037 million forecast. The NFP reading for May also saw an upward revision to 2.699 million from its initial reading of 2.509 million.
This job growth consequently translated to a downtick in the unemployment rate to 11.1% from 13.3% in May. This reading is also lower than the 3.037 million forecast that analysts had braced for.
Today, our forex calendar is blank from market-moving reports from both the US and the UK. This means that it’s probable for us to see some of yesterday’s price action spill over to today’s trading.
On the 1-hour chart, it can be seen that GBPUSD has recently made lower highs after a series of higher highs. Consequently, a head and shoulders pattern has formed. When you enroll in our free forex trading course, you will learn that this is widely considered as a bearish reversal indicator. A strong close below the neckline support at 1.2455 could trigger a bigger sell-off to near-term support at 1.2358 where GBPUSD bottomed on July 1.
On the other hand, be wary of a strong close above yesterday’s high at 1.2528 because this could invalidate the head and shoulders pattern. It could indicate that there are still buyers left in the market and GBPUSD coils soon retest its June 24 highs at 1.2541.