GBP/USD forecast: bearish signals emerging ahead of NFP data

on Sep 1, 2021
  • The GBP/USD rebounded after the weak US ADP jobs data.
  • The private sector added 374k jobs in August, which was lower than estimates.
  • The pair has formed an inverted cup and handle pattern.

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The GBP/USD popped on Wednesday as investors reflected on the relatively weak ADP jobs numbers and the positive American and UK manufacturing data. The pair rose to 1.3800, which was slightly higher than the intraday low of 1.3727.

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US jobs numbers

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The Automatic Data Processor (ADP) published the relatively weak American employment numbers. The survey found that American private companies added just 374k jobs in August. This was a relatively smaller increase than the median estimate of 613k. These numbers showed that the country’s labour market was starting to slow down, in part due to the Delta variant.

These numbers came two days ahead of the latest non-farm payrolls data by the Labour Department. Analysts expect the data to show that the American economy added more than 800k jobs in August. If they are accurate, it will be the first month in three months that the economy added less than 900k jobs.

At the same time, they expect that the unemployment rate dropped in August while the participation rate increased. Additionally, wages likely increased as the labour market tightened.

Meanwhile, the GBP/USD also reacted to the strong manufacturing PMI data from the UK and the US. In the US, data by the Institute of Supply Management (ISM) showed that the manufacturing PMI increased from 59,5 to 59.9. Another data by Markit revealed that the PMI declined slightly to 61.1. Therefore, there is a sense that the manufacturing sector has recovered better than the services industry.

The GBP/USD reacted the positive manufacturing PMI. According to Markit, the country’s headline PMI fell to 60.3. This was a positive number considering that it was above the expansionary zone of 50.0. Meanwhile, additional data showed that the country’s house price index (HPI) rebounded in August after falling in the previous two months.

GBP/USD forecast

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The GBP/USD initially dropped to a low of 1.3730 on Wednesday. This was a notable level since it was along the lower line of the ascending channel pattern. The pair then rose and is approaching the upper side of this channel. At the same time, it has formed an inverted cup and handle pattern and moved slightly above the 25-day and 50-day EMA. 

Therefore, there is a possibility that the pair will break out lower in the near term. If this happens, the next reference level will be at 1.3600, which is at the lower side of the cup.

GBP Forex