GBP/USD offered above confluence of Fib levels, eyes US GDP and ADP

The Pound-Dollar clocked a high of 1.2979 yesterday before ending the day on a weak note at 1.2916 levels. The reversal from 1.2979 to 1.2916 marked a failure to hold above 1.2965 [23.6% Fib R of Jan low - Aug high] and 1.2963 [38.2% Fib R of Aug high - Aug low]. 

The risk-off ran out of steam in the US session yesterday. The drop in the Yen and the sharp reversal in the USD shows the traders do not see a further escalation of tensions in the Korean Peninsula. Thus, the focus is back on the economics. 

US Q2 GDP could be revised higher

The market expects the GDP to be revised higher to 2.7% y/y from the initial estimate of 2.6%. Meanwhile, the ADP is expected to show the US private sector added 185K jobs in August vs. 178K additions seen in July. 

The rebound in the US dollar would gather pace if the GDP is revised higher and the ADP prints higher than estimates. Moreover, only a horribly weak ADP [under 100] could yield USD sell-off. This is because the economy is close to full employment, thus the jobs number above 100 could be considered a healthy number. 

On the domestic front, traders would keep an eye on PM May’s visit to Japan and the July Consumer credit number. 

GBP/USD Technical Levels

The currency pair traded around 1.2925 in Asia. FXStreet Chief Analyst Valeria Bednarik says, “The pair is currently challenging a major support, the 1.2920 region, which acted as a strong resistance for over two weeks, and seems poised to retreat further during the upcoming hours, as in the 4 hours chart, the price is breaking below its 200 EMA, while technical indicators have turned sharply lower from overbought levels, now heading towards their mid-lines. The 20 SMA in the mentioned chart aims north around 1.2880, providing a strong intraday support in the case of further declines.”