GBP/USD uninspired by disappointing US economic releases

The GBP/USD pair was seen struggling to extend the rebound from sub-1.2700 level and remained confined in a narrow trading range after US economic releases.

Currently trading around 1.2725-30 region, the pair during early European session came under renewed selling pressure and touched a fresh multi-decade low level of 1.2685, albeit managed to recover quickly from session through. A better-than-expected release of UK services PMI for the month of September further helped the pair to hold on to its recovery back above 1.2700 handle. 

Meanwhile, the incoming US economic data namely - ADP report and trade balance data fell short of market expectations and provide little impetus for US Dollar bulls. According to the ADP report, US private sector employment increased by 154K during September as against 166K job gain expected and 175K (revised lower from 177K) rise in August. 

Meanwhile the US trade balance for August came-in to show deficit widening to $40.7 billion as against expected deficit of 39.3 billion USD and $39.5 billion deficit recorded in July. The pair, however, failed to benefit from disappointing US economic releases as the ongoing concerns of 'hard Brexit' continued weighing on investor sentiment.

Next in focus would be US ISM non-manufacturing PMI and factory orders, which might provide some impetus for short-term traders. However, market attention this week would remain on one of the most important US economic indicators, monthly jobs report, popularly known as NFP, which is expected to infuse a fresh bout of volatility in the FX market.

Technical outlook

Valeria Bednarik, Chief Analyst at FXStreet, notes, "the 4 hours chart shows that technical indicators have pared losses and turned modestly higher, but remain within extreme oversold readings, while the 20 SMA has extended its decline above the current level, now around 1.2840."

"Given the negative sentiment towards the UK currency, the risk remains towards the downside, with a break  below the mentioned daily low, probably resulting in a steady decline towards the 1.2600/20 price zone. Above 1.2750 on the other hand, the pair can correct up to the 1.2800 region, where selling  interest awaits."