The GBP/USD forecast points north, with the dollar frail after several downbeat economic reports in the previous session. Meanwhile, the pound strengthened on better-than-expected PMI data.

The dollar had a tough time in the previous session as reports showed a slowdown in the economy that could push the Fed to start lowering borrowing costs. The US released data, which included private employment, service sector business activity, and unemployment claims. 

Private employers in the US hired fewer workers than expected in June. The ADP employment change occurred at 150,000, dropping from the previous 157,000. Meanwhile, economists had expected an increase of 163,000 jobs. 

Other employment figures revealed an unexpected increase in unemployment claims from 234,000 to 238,000 in the previous week. These reports indicated a decline in demand in the labor market, which has remained resilient for most of this year. If this trend continues with Friday’s nonfarm payrolls, the Fed will be pressured to cut interest rates. 

Furthermore, the services sector went from expansion to contraction in June as business activity declined. The ISM Purchasing Managers Index fell from 53.8 to 48.8, indicating a sharp slowdown. 

On the other hand, although UK service sector activity also declined, it was by a smaller margin than expected. The S&P Global’s services PMI fell from 52.9 to 52.1. Economists had expected the index to drop to 51.2. Investors will now wait for the UK parliamentary election results.

GBP/USD key events today

• UK parliamentary elections

GBP/USD technical forecast: Bulls take charge after consolidation

(Click on image to enlarge)

GBP/USD 4-hour chart

On the technical side, the GBP/USD price is in a bullish rally after breaking out of a period of consolidation. Previously, the price traded in a large range with support at 1.2700 and resistance at 1.2850. However, bears gathered enough momentum to break below the support level. 

Unfortunately, the downtrend barely lasted because the price started ranging again. At the same time, the RSI made a bullish divergence, showing bears barely had the strength to continue lower. At this point, bulls took control and broke above the 1.2700 resistance. The path is now clear for the price to revisit the 1.2850 resistance level.

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