The pound sterling maintained its upward inertial movement after the Bank of England raised the key rate. However, its growth was rather short-lived. Last Friday, it dropped slightly. The reason for a decline was an upbeat jobs report. Initially, analysts were betting on a further decrease of the greenback. However, it did not happen.
The unemployment rate rose to 4.0% from 3.9%. Such a weak figure should have pushed the US dollar to new lows. Yet, the greenback did not fall amid an increase in the participation rate to 62.2% from 61.9%. Apart from that, the US economy created far more jobs than expected in January.
Nonfarm payrolls grew by 467,000 jobs last month, while economists had forecast 30,000. It means that unemployment will continue to decline. Its current growth is associated with a demographic factor. Many young Americans entered the workforce in significant numbers. Therefore, the content of the report is extremely optimistic, whereas the initial forecasts were negative.
After a short-term flat near the resistance level of 1.3600, many traders closed long positions on the pound/dollar pair. It triggered the price reversal by 100 pips. It was quite expected given its overbought status.
The RSI indicator signals a correction on the 4H chart as it has crossed the 50 line from top to bottom.
The Alligator indicator has an intersection between the moving averages lines, which signals the completion of the upward movement on the 4H chart.
Outlook
The pair may still resume a downward movement from 1.3600. Bears are sure to take control provided that the price holds below 1.3500. In this case, they may push the pair to 1.3450.
Alternatively, the price may slow down a little bit, consolidating at the current levels. It will help the pair limit the downward potential. Bulls will take the upper hand if the pair settles above 1.3561. Under this scenario, the quotes are likely to return to the 1.3600 level.
The complex indicator analysis gives a sell signal on the short-term and intraday charts due to the downward price reversal.