FX.co ★ GBP/USD – September 7: Nonfarm Payrolls Did Not Provide Support for the Dollar

On the hourly chart, GBP/USD rebounded from the 76.4% retracement level of 1.3489 on Friday. Thus, the upward movement may continue today toward the 100.0% Fibonacci level at 1.3556. A rebound from this level would favor the dollar and some decline toward the 1.3489 level. Consolidation above 1.3556 would allow expectations of further growth toward the resistance level of 1.3633–1.3641.

The market situation remains "bullish." The latest completed upward wave broke the previous peak, while the latest downward wave has not yet broken the previous low. Thus, the bulls currently have the initiative in the market, and their advantage remains intact. The "bullish" trend can only be considered broken after the low of the latest completed wave is broken, i.e., below 1.3414, or after two downward waves are formed.

The fundamental background on Friday allowed the bears to continue their attacks, but they were not in the mood to do so that day. Even a strong Nonfarm Payrolls report and a fairly positive unemployment report failed to help them. Thus, based on this factor alone, a new advance by the bulls can be expected this week. In addition, the US inflation report will be released this week. If it turns out that the Consumer Price Index slowed in August, this would mark the third consecutive month of decline. In my view, under such circumstances, and taking into account the US labor market, there is no reason to expect the FOMC to tighten monetary policy. At present, only tighter Fed policy could help the dollar. Therefore, the weaker the US labor market reports and the further inflation falls, the worse the bears and the dollar will perform. I would also like to note that the Bank of England could tighten policy next week. UK inflation accelerated to 2.9% year-on-year in July, and the Bank of England may not wait until it approaches 4%, choosing to act preemptively. The bulls may also receive support from the ECB meeting on Thursday, at which interest rates are expected to be increased.

On the 4-hour chart, GBP/USD fell to the 1.3467–1.3482 support level. A rebound from this zone after a "bullish" divergence formed on the CCI indicator led to a reversal in favor of the pound and a rise toward the 23.6% retracement level at 1.3538. A rebound from this level would allow expectations of some decline toward the 1.3467–1.3482 level. Consolidation above 1.3638 would allow expectations of continued growth toward the 0.0% retracement level at 1.3657.

Commitments of Traders (COT) Report:

The sentiment among "Non-commercial" traders became less "bearish" over the latest reporting week. The number of Long positions held by speculators decreased by 8,226, while the number of Short positions decreased by 3,175. The gap between the number of Long and Short positions is currently approximately 85,000 versus 135,000. The gap and the bears' advantage are gradually narrowing, but the bears still retain a substantial advantage. Previously, the bears' dominance was not in question, but now it is, as the fundamental background has changed.

I still do not believe in a "bearish" trend for the pound, but in the near term, everything will depend on Trump's trade policy, the monetary policy of the Fed and the Bank of England, as well as the duration, scale, and consequences of the war in the Middle East. In recent months, the market has shifted toward expectations of peace, but negotiations between Iran and the United States failed without really getting started. And there is no guarantee that they will resume in the near future. The Fed's position on monetary policy remains contradictory.

News calendar for the United States and the United Kingdom:

On September 7, the economic events calendar contains no noteworthy releases. The economic background will have no impact on market sentiment on Monday.

GBP/USD Forecast and Trading Tips:

Selling the pair is possible today if it rebounds from 1.3556 on the hourly chart, with targets at 1.3526 and 1.3489. Buying was possible after a rebound from 1.3489, with targets at 1.3556 and 1.3633. These trades can be kept open today.

The Fibonacci grids are drawn from 1.3557–1.3272 on the hourly chart and from 1.3158–1.3655 on the 4-hour chart.