GBPUSD Trend Line (July 2, 2015)

The pair is also drawing support at the 50% Fibonacci retracement level and the 100 SMA.

Stochastic is indicating oversold conditions, which means that a bounce might take place and lead to a move towards the previous highs at the 1.5900 levels. RSI is also giving the oversold signal, suggesting that sellers are already tired and that buyers might jump in.

In addition, the 100 SMA is moving above the 200 SMA, confirming that the uptrend could stay intact. However, a downward crossover might signal a potential selloff and a longer-term downtrend.

Event risks for this trade today include the release of the UK construction PMI, which is expected to climb from 55.9 to 56.6 and reflect stronger industry expansion. Take note, however, that the previously released manufacturing PMI turned out to be a disappointment, increasing the odds of a downside surprise.

The US economy is also set to print its NFP report for June today and possibly show a 231K increase in hiring, slightly slower compared to the previous month’s 280K gain. The unemployment rate is expected to improve from 5.5% to 5.4% while average hourly earnings could show a 0.2% gain. Stronger than expected data could renew demand for the dollar, as these might confirm that the Fed would hike rates in September.

On the other hand, weaker than expected reports could undermine rate hike expectations and lead to a dollar selloff. Traders are waiting for convincingly strong figures to ensure that tightening might take place sometime this year.

Note that leading labor indicators came in better than expected, increasing the odds of an upside surprise. The ADP non-farm employment change report showed a 237K gain versus the projected 219K increase, also higher than the previous 203K rise.

By Kate Curtis from Trader's Way