FX.co ★ GBP/USD. Smart Money. What Is Happening with Unemployment in the US?

The GBP/USD pair rebounded from the "bullish" imbalance 12 zone, which served as a new buy signal. However, just a few days later, it returned to this pattern. This pattern may act as the lower boundary of a local sideways range, so I am not rushing to conclusions until it is invalidated. Despite the decline in the pound over the past few days, the bullish trend remains intact, and bulls continue to dominate the market. On Wednesday, they could have launched a new attack in response to the ADP and JOLTS reports, which are directly related to the U.S. labor market and failed to show solid results. However, the bulls appeared to be "on the sidelines," as they showed no reaction to these reports.

The "bullish" imbalance 12 remains the only viable pattern. If it is invalidated, this will not lead to an immediate cancellation of the bullish trend; it will merely delay the pound's next advance. Of course, traders are interested in trends rather than pauses, but much this week will depend on U.S. economic data. Let me remind you that traders' main concerns center on the U.S. labor market and the unemployment rate. Friday's reports did not provide a clear answer about the state of the U.S. labor market: the unemployment rate declined, but the number of new jobs was once again disappointing.

The current chart picture is as follows. The bullish trend in the pound may be considered complete, but the bullish trend in the euro is not. Thus, the European currency may continue to pull the pound higher for as long as necessary—or vice versa. Bulls bounced from bullish imbalance 1, from bullish imbalance 10, from bullish imbalance 11 twice, and now also from imbalance 12, which is likewise bullish. Therefore, I still expect growth toward the 2025 highs—around the 1.3765 level.

On Friday, the news background favored the bears. Despite the importance of the Nonfarm Payrolls report, I consider the unemployment rate to be more significant. Since unemployment returned to 4.4%, I believe the payrolls data can be largely disregarded. As a result, bears—who had been out of favor all week—received unexpected support on Friday. Imbalance 12 has not been invalidated, but it is close to that point.

In the United States, the overall news backdrop remains such that, in the long term, nothing but a decline in the dollar can be expected. The situation in the U.S. remains quite challenging. The government shutdown lasted a month and a half, and Democrats and Republicans agreed on funding only through the end of January. There was no U.S. labor market data for a month and a half, and the latest figures can hardly be considered positive for the dollar. The last three FOMC meetings ended with dovish decisions, and the most recent labor market data allow for a fourth consecutive easing of monetary policy in January. In my view, the bulls have everything they need to continue a new offensive and return to the year's highs.

For a bearish trend to form, the dollar would need a strong and stable positive news backdrop, which is difficult to expect under Donald Trump. Moreover, the U.S. president himself does not need a strong dollar, as this would keep the trade balance in deficit. Therefore, I still do not believe in a bearish trend for the pound, despite the fairly strong declines in September and October. Too many risk factors continue to weigh heavily on the dollar. How do the bears plan to push the pound further down if a bearish trend is supposedly forming now? If new bearish patterns emerge, a potential decline in the pound sterling can be reconsidered.

News Calendar for the U.S. and the UK:

On January 12, the economic calendar contains no noteworthy events. The impact of the news background on market sentiment on Monday will be absent.

GBP/USD Forecast and Trading Advice:

The outlook for the pound remains favorable for traders. Four bullish patterns have been worked out, signals have formed, and traders can maintain long positions. I see no fundamental reasons for a sharp decline in the pound in the near future.

A resumption of the bullish trend could have been expected as early as from imbalance zone 1. At present, the pound has reacted to imbalance 1, imbalance 10, imbalance 11, and imbalance 12. As a potential upward target, I am considering the 1.3725 level, though the pound could rise much higher. If bearish patterns appear, the trading strategy may need to be revised, but at the moment, no such patterns are present.