Technical Analysis

GBP/USD Price Analysis – June 10, 2024

By LonghornFX Technical Analysis
Jun 10, 20244 min

Daily Price Outlook

During the European trading session, the GBP/USD pair continued its downward trend, remaining under pressure around the 1.2691 level and hitting an intra-day low of 1.2689. The reason for this can be attributed to the bullish US dollar, which gained traction following stronger-than-expected US Nonfarm Payrolls (NFP) data.

This dampened expectations of Fed rate cuts in September, pushing the US dollar higher and contributing to the GBP/USD pair's losses. Additionally, signs of more layoffs in the UK employment data could undermine the Pound Sterling (GBP) by increasing expectations of early rate cuts by the Bank of England (BoE).

Impact of US Nonfarm Payrolls on GBP/USD Pair and Key Events Ahead

On the US front, stronger-than-expected Nonfarm Payrolls (NFP) data has lowered the chances of Federal Reserve (Fed) rate cuts this year. This has strengthened the US Dollar (USD) and contributed to gains in the GBP/USD pair.

The robust US employment report has reduced expectations of a Fed rate cut before September, with futures traders seeing almost no chance of this happening, which is likely to support the USD for now.

On the data front, US Nonfarm Payrolls rose by 272,000 in May, exceeding the expected 185,000. The unemployment rate increased slightly to 4.0%, and average hourly earnings grew by 4.1% year-over-year, beating the 3.9% estimate. These figures indicate a stronger-than-expected job market.

The strong US job figures and reduced expectations of Fed rate cuts have bolstered the US Dollar, putting pressure on the GBP/USD pair. Investors are now focused on the UK employment data for May, due on Tuesday.

Additionally, the US Consumer Price Index (CPI) and the Fed's decision this week will be in the spotlight.

Impact of UK Employment Data on GBP/USD Pair

On the UK front, upcoming employment data on Tuesday, including Claimant Count Change, Employment Change, and Average Earnings, will be closely watched. If there are indications of increased layoffs, it could lead to expectations of early rate cuts by the Bank of England (BoE), weakening the Pound Sterling (GBP).

Investors are particularly sensitive to signs of economic weakness amid uncertainties, which may prompt the BoE to take preemptive measures. Thus, any negative surprises in the employment figures could put downward pressure on the GBP, contrasting with the strengthened USD due to favorable US job data.

GBP/USD Price Chart - Source: Tradingview
GBP/USD Price Chart - Source: Tradingview

GBP/USD - Technical Analysis

The GBP/USD pair is currently trading at $1.27176, reflecting a modest decline of 0.06% for the day.

Analyzing the 4-hour chart, the pair is moving within a defined range, indicative of cautious market sentiment ahead of key economic events. The pivot point at $1.2762 is crucial for determining the short-term direction of the pair.

Immediate resistance is observed at $1.2745, followed by higher resistance levels at $1.2779 and $1.2814. These levels represent potential barriers that the GBP/USD pair needs to overcome to initiate a sustained upward movement.

On the flip side, immediate support is noted at $1.2681, with subsequent support levels at $1.2645 and $1.2611. These support zones could provide a buffer against further declines.

Technical indicators present a mixed picture. The Relative Strength Index (RSI) is at 35, suggesting that the market is approaching oversold territory, which might indicate a potential rebound if broader market conditions support it.

Additionally, the 50-day Exponential Moving Average (EMA) is positioned at $1.2755, slightly above the current price. This suggests that the immediate resistance could be reinforced by the EMA, making it a critical level to watch for any potential breakout or reversal.

In conclusion, traders should consider a buy limit order at $1.27046, targeting a take profit level at $1.27618, with a stop loss set at $1.26667.

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