The first thing to consider is the dollar's overbought conditions. The market was clearly ready to grasp at anything to adjust this situation ahead of the U.S. Department of Labor's report. This was evident as early as Tuesday when the JOLTs data exerted downward pressure on the dollar. Although these reports, due to their ambiguous interpretation, traditionally do not have a significant impact. But the movement that we saw on Tuesday was insufficient and did not relieve tension. So as soon as we found out that US job growth slowed sharply to 177,000, the dollar became weaker. To a great extent, the overheating of the market has been addressed. So now the market needs to take a break.
Therefore, we don't expect the market to react to today's US report on initial jobless claims. Especially since the changes are expected to be quite insignificant. However, there's one thing to take note of. The preliminary assessment of inflation in the eurozone. This is a crucial report that overshadows everything else. And if you also consider that the rate of consumer price growth should slow from 5.3% to 5.0%, then any market stabilization is out of the question. A further slowdown in inflation will surely compel the European Central Bank to act more restrained in terms of interest rate hikes. This is mostly a negative factor. Primarily for the single currency, and then for everyone else. So, the dollar has a chance to recoup some of its losses.
During a sharp upward movement, the GBP/USD pair jumped above the 1.2700 level. This move indicates an increase in the volume of long positions, thus pointing to the pound's recovery after its recent decline.
On the four-hour chart, the RSI technical indicator is hovering in the upper area of 50/70, which points to the bullish sentiment.
On the same time frame, the Alligator's MAs are headed upwards, which corresponds to the current direction. It changed its direction when the volume of longs had increased.
Outlook
Keeping the price above the 1.2700 mark could strengthen the pound. In the long run, the price may even approach the upper band of the previously breached sideways channel at 1.2650/1.2800. The bearish scenario will come into play in case the price returns below 1.2700. In this case, the price may fluctuate around the 1.2650/1.2700 range.
The complex indicator analysis points to the recovery of the pound sterling in the short-term and intraday periods.
