The GBP/USD price has formed a rising wedge pattern as investors wait for the upcoming non-farm payrolls (NFP) data. It was trading at 1.2445 on Friday, a few points below the year-to-date high of 1.2527.
US NFP data preview
The biggest forex news on Friday will be the upcoming US non-farm payrolls data scheduled for Friday afternoon. These are important numbers because they show the strength of the American economy as it recovers from the pandemic.
They are also crucial because the Fed has pledged to be data-dependent on interest rates. And jobs numbers are one of the most important data that the bank focuses on since it is part of its dual-mandate.
Economists believe that the labor market weakened in March as many companies reduced their workforce. The overall estimate is that the economy created 213k jobs in March after it added 311k in the previous month.
On Wednesday, data from ADP, an independent company, revealed that the private sector added just 148k jobs in March, the lowest level in years. A day before, a report by the Labor Department showed that the economy’s job openings dropped from over 10M to over 9M for the first time in two years.
Economists also believe that the US unemployment rate remained at 3.6% while the average hourly earnings rose by 4.3%. If this estimate is accurate, it will be the slowest annual increase in more than a year.
If the US publishes strong jobs numbers, it will mean that the Fed will have a justification to continue with its hawkish tone. As a result, the GBP/USD pair will likely validate the rising wedge pattern and retreat.
GBP/USD technical analysis
On the 4H chart, we see that the GBP to USD exchange rate has been in a slow bullish trend in the past few months. During this rally, it has been safe to buy every dip since the pair has formed higher highs and higher lows.
The GBP to USD pair has moved above the 25-day and 50-day moving averages, which is a positive sign. However, it has also formed a rising wedge pattern, which is shown in orange.
With this wedge pattern nearing its confluence, we can’t rule out a situation where the pair retreats in the coming days. If this happens, the next reference point to watch will be at 1.2300. However, a move above the year-to-date high at 1.2528 will signal that there are more buyers in the market.
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