As I mentioned before, the GBP/USD will not have an opportunity to breach the downside trend without moving above the psychological resistance at 1.3000 again.

• By the end of last week's trading, the GBP/USD exchange rate rebounded to the 1.2792 resistance level, recovering from strong selling operations that pushed it towards the 1.2620 support level in the same week, its lowest in five weeks.
• It settled around 1.2750 at the beginning of this week's trading.
• The rebound to the upside of the GBP/USD came after the US Non-Farm Payroll report showed a knack for appearing consistently above expectations over recent months, but the August report presented a rare bearish surprise that seems to have hit the US dollar in the short term.

The news reported that US payrolls rose by 187K in July according to the US Labor Department report, which led to expectations lower at 200K, and came in broadly unchanged in June which was revised down by 185K.

Commenting on this, Richard Flynn, Managing Director at Charles Schwab UK, said that “The US jobs report is a bit weaker than expected. Last month's results provided evidence that employment growth is beginning to slow, and today's numbers suggest that a downward trend may be on its way.

 “The next consensus reading in employment on the July payroll is the kind of job market weakness the Fed is looking for,” said Ali Jafari, economist at CIBC Capital Markets.

And the gains might have been more comprehensive had the wage numbers not been so strong: average hourly earnings rose 4.4% in the year to July, beating expectations of 4.2%, suggesting that wage pressures could support domestic inflation for some time to come. Moreover, the country's unemployment rate actually fell to 3.5% from 3.6%, confirming that the labor market remains tight and in line with inflationary wage rates.

The US Federal Reserve would probably prefer to see wage gains closer to 3%. Growth in the region of 4% may not be enough to convince bankers that monetary policy is working, so an interest rate hike may be imminent. As always, there is conflicting data on these releases. However, the labor market appears to be slowing down, albeit slowly, which is what the US Federal Reserve wants to see. All in all, this increases the chances of rates peaking, and according to some analysts, the US Federal Reserve is carrying out the trick of controlling inflation while keeping the economy strong.

The recent rebound in the US dollar has a series of economic data that beat consensus and are to be thanked for shifting expectations in favor of another rate hike at the Federal Reserve in September while dampening expectations for a rate cut.

While the data out of the US was supportive of the rise in the value of the pound against the dollar, it is likely that it will not be significant enough to change the current short-term bearish trend. Currently, investors will view US inflation data this week as the next major event in the dollar's exchange rate calendar.

GBP/USD Technical Outlook

As I mentioned before, the GBP/USD will not have an opportunity to breach the downside trend without moving above the psychological resistance at 1.3000 again. According to the performance on the daily chart below, moving around and below the support level at 1.2700 will be important for strong and continuous control of the bears on the trend.

The move towards the support level at 1.2580 is a culmination of the bears' dominance, and at the same time it moves the technical indicators towards strong oversold levels, from which buying can be considered.

(Click on image to enlarge)

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