British Pound buckles as DXY nears 102 on US jobs, factory strength

• US Jobless claims and firm ISM components reinforce US resilience.
• US Prices Paid surge keeps inflation pressure elevated despite softer PCE.
• Nonfarm Payrolls now loom as next test for Sterling bears.

The Pound Sterling dives by over 0.44% on Thursday, following as business activity in the manufacturing sector remains solid in the US, while US jobs data confirmed the strength of the labour market. Consequently, this pushed US yields higher and the US Dollar as well. The GBP/USD trades at 1.3205.

GBP/USD slides as resilient US data and geopolitical tension lift Greenback

Market mood is dismal, as a resolution to the US-Iran conflict seems far from imminent. A report by Al Jazeera revealed that a US official said three aircraft carriers and two landing groups would be deployed around Iran by the end of November. Consequently, Oil prices remain bid, US Treasury yields are elevated near 2000s levels and the Greenback, as measured by the US Dollar Index (DXY), gains 0.47%.

The DXY, which measures the buck’s performance against six currencies, is at 101.94, on the verge of challenging the 102.00 mark. On the other hand, the US 10-year T-note is down 1 basis point to 5.277%.

US data showed that the economy is strong, even though the ISM Manufacturing PMI in September was 54.5, below estimates of 55, a tenth below August’s 54.6. The sub-components of new orders and employment rose, with the former up from 53.7 to 55.3 and the latter edging up from 51.2 to 52.7.

The ISM Prices Paid sub-component continued to show that inflationary pressures are building, as the index rose from 71.1 to 77.1, exceeding forecasts of 72.3.

Earlier, Initial Jobless Claims for the week ending September 26, at 197K, were below forecasts of 200K and also less than the previous week, 198K.

Despite witnessing the rise in the ISM prices paid sub-component, the softer reading of the Fed’s gauge of inflation, the core PCE is weighing on money market traders, which had decreased the chances for a rate hike at the October meeting, from around 38% to 30%, as revealed by Prime Terminal.

In the UK, a scarce economic docket turns the focus to Prime Minister Andy Burnham speech, in which he hinted at making changes to pensions and put back into the table a potential re-joining to the European Union, which according to Chris Turner, ING strategist “would likely be seen as a positive by the foreign exchange market, having witnessed sterling's crash following the Brexit vote in 2016.“

Ahead, the UK’s docket is absent, but not so in the US. The schedule will feature September’s Nonfarm Payrolls report, as well as further Fed speaking.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3203, maintaining a bearish near-term bias as it holds clearly below the cluster of key simple moving averages (SMAs) and broken trend lines overhead. The 50-, 100- and 200-day SMAs, represented by the latest triple moving average reading at 1.3455, sit well above spot and reinforce a capped tone, while the recent break under the downtrend-related levels around 1.3315 and 1.3435 leaves the pair vulnerable to further downside. The Relative Strength Index (14) at 29.9 flirts with oversold territory, hinting that bearish momentum is stretched but not yet signaling a confirmed reversal.

On the topside, initial resistance is seen at the former trend-line break around 1.3315, ahead of the descending resistance trend line tied to the 1.3653 peak near 1.3435. Above there, the grouped daily SMAs around 1.3455 form a dense barrier, with additional resistance at the higher support-turned-resistance trend-line breaks at 1.3540 and 1.3742. On the downside, the absence of well-defined nearby structural support levels below 1.3203 suggests that any recovery would likely be corrective while the pair trades under these clustered resistance zones.

(The technical analysis of this story was written with the help of an AI tool. Know more.)