British Pound Forecast: GBP/USD Rebound Stalls Ahead of US NFP Report

British Pound Outlook: GBP/USD

GBP/USD gives back the rebound from the weekly low (1.3334) as the ISM Services index climbs to 52.0 in August from 50.1 the month prior, and data prints coming out of the US may continue to sway the exchange rate as the Federal Reserve still combats inflation.

British Pound Forecast: GBP/USD Rebound Stalls Ahead of US NFP Report

Keep in mind, GBP/USD came under pressure earlier this week as the UK 30-Year yield climbed to its highest level since 1998, and the British Pound may face additional headwinds as the outlook for fiscal policy remains clouded with uncertainty.

US Economic Calendar

Meanwhile, data prints coming out of the US may encourage the Federal Open Market Committee (FOMC) to keep interest rates higher for longer as the Non-Farm Payrolls (NFP) report is anticipated to show a 75K rise in August.

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In turn, another rise in employment may keep GBP/USD under pressure as it raises the Fed’s scope to further combat inflation, but a weaker-than-expected NFP report may drag on the Greenback as it fuels speculation for lower US interest rates.

With that said, the threat of a head-and-shoulders formation may continue to dissipate should GBP/USD retrace the decline from earlier this week, but failure to defend the weekly low (1.3334) could lead to a test of the August low (1.3142).

GBP/USD Price Chart – Daily

Chart Prepared by David Song, Senior Strategist; GBP/USD on TradingView

• GBP/USD seems to be coiling within the August range as it attempts to retrace the decline from earlier this week, but lack of momentum to close above the 1.3410 (78.6% Fibonacci retracement) to 1.3460 (23.6% Fibonacci extension) zone may push the exchange rate back toward the weekly low (1.3334).
• A move/close below 1.3310 (100% Fibonacci extension) brings 1.3210 (50% Fibonacci extension) on the radar, with the next area of interest coming in around the 1.3140 (78.6% Fibonacci extension) to 1.3150 (23.6% Fibonacci extension), which incorporates the August low (1.3142).
• At the same time, a close above the 1.3410 (78.6% Fibonacci retracement) to 1.3460 (23.6% Fibonacci extension) zone may push GBP/USD toward the August high (1.3595), with a push/close above 1.3650 (38.2% Fibonacci extension) opening up the July high (1.3789).

--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong