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Uptrend on GBPUSD Invalidated by US NFP and Brexit Issues?


Like most of the majors, GBPUSD closed lower on Friday following the better than expected NFP report from the US. GBPUSD extended its losses as it finished last week’s trading at 1.2883, down from its daily open price at 1.2926.

US NFP Prints Above 200,000

On Friday, the NFP report showed that there were 225,000 jobs added in January. This figure was way more than what analysts had anticipated at 163,000 and the education and healthcare industries were credited for the uptick. According to the report, milder winter conditions in the US made it easier for people to find jobs.

On the other hand, average hourly earnings only printed at 0.2% and missed the consensus at 0.3%. The unemployment rate also came in higher at 3.6% versus the 3.5% forecast. These numbers seemed to have been shrugged off by market participants, though.

Brexit-Related Issues Weigh Down the Pound

Aside from the better-than-expected NFP report which weighed down GBPUSD, there was also trouble on the domestic front. There were reports on Friday that France is vying to move euro derivatives trading away from London. The London Stock Exchange accounts for 200 billion USD-worth of euro derivatives and 90% of global interest rate swaps daily. According to a report by Reuters, these efforts are made to avoid the US from stepping in.

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GBPUSD Outlook

On the daily time frame, we can see that GBPUSD has broken below trend line support (from connecting the lows of September 3 and October 10). This could be a sign that the uptrend on the currency pair has been invalidated and that it may soon fall to around 1.2780 where it bottomed on October 24 and November 8.

However, it is worth noting that the currency pair is testing support at the 100 SMA around the 1.2800 handle. A closer look at the 4-hour chart also shows that GBPUSD has the potential to trade higher to the 1.3000 handle. There is a confluence of resistance at this price. For one, it coincides with the previous lows on GBPUSD. It also aligns with the 38.2% Fib leven when you draw from the high of January 31 to the low of January 7. Lastly, the broken trend line from the daily time frame coincides with this price too. Reversal candles around this price could indicate that GBPUSD may still resume its fall. On the other hand, a strong bullish close above 1.3000 could signal that there are still enough buyers in the market to push price to 1.3200.