GBP/USD pares Thursday losses, reclaims 1.1900 on soft USD after US NFP report

• US Nonfarm Payrolls rose by 223K, exceeding estimates, while the unemployment rate fell.
• Average Hourly Earnings were lower than the 5% foreseen, signaling that inflation on wages is easing.
• GBP/USD Price Analysis: The rally could cap around the 50-EMA and daily pivot confluence around 1.1950.

The GBP/USD is trimming some of its Thursday losses, as the US Department of Labor released upbeat economic data, which was positive, though the US Dollar (USD) is weakening across the board. Therefore, the GBP/USD is trading volatile at around 1.1900-1.1920 after hitting a daily low of 1.1841.

Investors’ mood remains upbeat following the release of December’s US Nonfarm Payrolls report by the US Bureau of Labor Statistics. Payrolls jumped by 223K exceeding estimates of 200K, flashing a solid labor market and justifying the need for further Federal Reserve’s (Fed) tightening. Data showed that the Unemployment Rate dropped to 3.5%, while Average Hourly Earnings dropped to 4.6% YoY, vs. estimates of 5%.

According to a tweet by Wall Street Journal (WSJ) Fed Watcher Nick Timiraos, “revisions to average hourly earnings data paint a marginally less worrisome picture for the Fed on wages than the Nov report.”  That said, the US Dollar Index, which measures the buck’s value against a basket of rivals, tumbled below the 105.000 mark, spurred by that Tweet, down by 0.19%, at 104.963, a tailwind for the GBP/USD, which remains negative in the week by 1.38%, though in the day, registering minuscule gains of 0.13%.

Regarding US Treasury bond yields, the 10-year benchmark note rate edged lower by four bps, down at 3.675%, while the CME FedWatch Tool shows that odds for a 25 bps rate hike in the February meeting are approaching the 70% threshold.

GBP/USD Reaction

Per the GBP/USD 1-hour chart, the pair jumped from around 1.1850, rallying sharply towards the 1.1920 mark. On its way north, it cracked the 20-EMA at 1.1906, though it remained slightly shy of reaching the daily pivot point at around 1.1952. The Relative Strength Index (RSI) crossed above its 50 mid-line, while the Rate of Change (RoC) indicates buying pressure is building. Therefore, the GBP/USD key resistance levels would be 1.1952, followed by the 100-EMA at 1.1979 and the 200-EMA at 1.2016.

As an alternate scenario, GBP/USD first support level would be the 20-EMA at 1.1906, above the 1.1900 figure, followed by today’s daily low of 1.1841.