GBP/USD is moving sideways around 1.2600 ahead of the US ADP report
- The Pound remains vulnerable, capped below 1.2610.
- Weak US macroeconomic data are cushioning sterling’s reversal.
- GBP/USD might trigger a double-top pattern below 1.2600.
Sterling’s recovery attempt from Tuesday’s low at 1.2575 has been capped at 1.2610 earlier on Wednesday, which has left the pair in noman;’s land awaiting the release of the US ADP employment report.
Weak Construction data adds pressure on the Pound
Earlier today, the UK S&P Global/CIPS Construction PMI declined to 45.6, against expectations of an improvement to 46.3 from the 45.6 reading in October, which has weighed on demand for the GBP.
On the other hand, the weak US JOLTs data seen on Tuesday have added to evidence that the high interest rates are starting to pinch the labour market. This feeds hopes that the Fed might start rolling back its tightening cycle early next year, which is hurting the USD.
In this context, the pair remains steady, with investors awaiting the release of the US ADP data and Friday’s US Nonfarm Payrolls for further insight into the Federal Reserve’s monetary policy outlook.
From a wider perspective, technical indicators show the pair losing momentum. Price action has breached the 4h 50 SMA and a key support at 1.2600 is being tested. A confirmation below here would trigger a double-top at 1.2730 increasing pressure towards 1.2517 ahead of the measured target, at 1.2460.
Technical levels to watch