GBP USD tumbles to critical juncture on NFP data

GBP/USD plummeted further on Friday morning after the US non-farm payrolls report and unemployment rate figures were released by the US Labor Department.

Although the number of US jobs added in August at 173,000 fell far short of the prior consensus estimate of 220,000, the unemployment rate dropped down to 5.1% against the 5.2% expected. This represents the lowest jobless rate in more than seven years. It is also a rate at which the Fed considers the US economy to be at full employment.

In addition, July’s non-farm employment change was revised up substantially from 215,000 to 245,000, and average hourly earnings increased by more than expected (0.3% actual vs. 0.2% expected).

Overall, despite the substantial miss on the headline number, the US dollar rose broadly against most other major currencies, including the British pound. This rise may be attributed to the market’s view that the employment data released on Friday may be sufficient to encourage a sooner interest rate hike by the Fed.

For the GBP/USD, this dollar surge prompted the currency pair to continue the sharp plunge that has been in place for the past week and a half. From its high around the 1.5800 resistance level in late August down to its current low around 1.5200 support, GBP/USD has dropped by nearly 4% in less than two weeks. In the process of this plummet, the currency pair has broken sharply below its key 50-day and 200-day moving averages.

Having just hit and dipped below major support around the 1.5200 level, where the pair last bottomed in early June, GBP/USD could likely have significantly further to fall. This should especially be the case as the market currently views a US Fed rate hike most probably preceding any Bank of England rate hike.

With any sustained breakdown below the noted 1.5200 support level, the next major downside target is at the 1.5000 psychological support/resistance level, followed by key support around 1.4800.