GBP/USD. Analysis and Forecast

[Ben Graham]

The pound is falling against the US dollar for the third consecutive day. The GBP/USD pair remains under pressure as the dollar strengthens following unexpectedly strong US Services PMI data for December.

A slight deterioration in risk sentiment is partially offsetting the mixed US economic data released on Wednesday, supporting the dollar as a safe-haven asset and allowing it to retain its weekly gains.

In particular, the Institute for Supply Management reported an unexpected increase in business activity in the non-manufacturing sector, with its Services PMI rising to 54.4 from 52.6 in November. At the same time, the ADP private-sector employment report showed a smaller-than-expected increase in December.

The November JOLTS data also revealed a larger-than-forecast decline in job openings, pointing to a continued easing in labor demand. These indicators are reinforcing market expectations for further Federal Reserve policy easing, which could limit additional dollar strength.

In turn, a more hawkish stance from the Bank of England, signaling that interest rates are approaching a neutral level, could support the pound and thus curb further declines in GBP/USD.

No major economic releases are expected from the UK on Thursday, so spot prices will be driven by US dollar dynamics. During the North American session, traders should watch US initial jobless claims data. However, the main focus should be on Friday's US Nonfarm Payrolls (NFP) report, which will adjust Federal Reserve interest-rate expectations, potentially boost the dollar, and determine the next directional impulse for GBP/USD.

From a technical perspective, prices are attempting to hold above support at 1.3440, where the 20-day SMA is located. If this level fails to hold, the pair could accelerate its decline toward the round 1.3400 level, followed by the key support that defines bullish strength—the 200-day SMA. For now, however, daily oscillators remain positive, allowing bulls to stay in the game.

Resistance is seen at the 9-day EMA around 1.3470, ahead of the psychological 1.3500 level.

The table below shows the percentage change of the US dollar against major currencies today. The US dollar posted its strongest gains against the New Zealand dollar.

The material has been provided by InstaForex Company - www.instaforex.com