GBP/USD price struggles as U.S. economic data strengthens dollar
GBP/USD dips to lowest since April as US labor data supports dollar strength
The British pound faced renewed pressure, trading near 1.2352, its lowest level since April, as investors braced for key US economic data releases. Despite a mild recovery attempt to 1.2400 during the European session, the GBP/USD pair showed no signs of sustained upward momentum due to cautious market sentiment.
The GBP/USD pair's near-term direction will likely hinge on US economic data releases and their implications for Federal Reserve policy. With inflation trends and labor strength influencing market sentiment, traders remain cautious as the pair tests crucial support levels.
GBP/USD price dynamics (Nov 2024 - Dec 2024) Source: TradingView.
US dollar gains on strong labor market data
The US dollar maintained its strength after a better-than-expected labor market report. Weekly initial jobless claims dropped to 211,000, surpassing the forecasted 222,000, reinforcing confidence in the US economy. However, mixed performance in US stock index futures early Friday slightly limited additional USD gains.
Anticipation surrounds the US ISM Manufacturing PMI report for December, expected at 48.4. A reading above 50 could signal an expansion in manufacturing, potentially reinforcing the case for a Federal Reserve policy hold at its next meeting. Traders are also watching the PMI's prices paid index, forecasted to rise to 51.7, which may offer further inflation cues.
Technical analysis: key support and resistance levels
The GBP/USD 4-hour chart indicates a bearish trend, with the Relative Strength Index (RSI) holding above 30 after Thursday's steep drop. This suggests that the recent upward movement is likely a technical correction rather than a trend reversal.
Support levels are positioned at 1.2350, 1.2300, and 1.2250, while immediate resistance is noted at 1.2400, followed by 1.2440 and the 20-period Simple Moving Average at 1.2485. A move above these levels could signal potential recovery, but bearish sentiment remains strong amid broader dollar strength.
In our previous analysis, we highlighted the poundβs inability to hold above 1.2500 amid dovish Bank of England expectations. The pair continues to reflect pressure from diverging monetary policies between the BoE and the Fed.
