GBPUSD might be tired from its climb as price seems to be forming a head and shoulders pattern on its 1-hour time frame. The pair has yet to complete the right shoulder if the short-term Fib levels keep gains in check.
In particular, price could find resistance at the 1.3200 major psychological level, which has served as an area of interest in the past. For now, price is already hitting resistance around the 38.2% Fibonacci retracement level that lines up with the 200 SMA dynamic inflection point.
The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. Also, stochastic is nearing the overbought zone, which means that sellers could take control of price action soon. If so, GBPUSD could head back to the lows at 1.3050, which is the neckline of the head and shoulders pattern.
Data from the US came in mixed yesterday but traders still seem hopeful that Fed rate hike expectations could stay in play. The ADP report printed a 177K increase in hiring for August, higher than the projected 174K figure. The July figure was upgraded to show a 194K increase from the initially reported 179K gain. Meanwhile, the Chicago PMI showed a sharper than expected drop to 51.5 to show a slowdown in industry growth.
Event risks for today include the UK manufacturing PMI release. Analysts are expecting to see a rise from 48.2 to 49.1 to indicate a slower pace of industry contraction. Stronger than expected data could assure traders that the UK economy is able to stay afloat even after the Brexit vote.
As for the US, initial jobless claims and the ISM manufacturing PMI are up for release. A drop from 52.6 to 52.0 is expected for the PMI but traders are likely to pay closer attention to the jobs component to see if it would hint at a stronger NFP reading or not. Analysts are expecting to see a 186K increase in the NFP report for August, lower than the earlier 255K gain.