GBP/USD pulled back to the 1.58 level on Thursday, showing that the area is indeed important. The breaking above this level showed significant strength, and as a reminder, it offered support at the end of the session yesterday.
The area should show support down to the 1.57 level, and for good measure many traders will wait until the hammer from the Monday session is shattered as well. This is going to take real strength by the sellers, and would show just how suddenly things have changed if it were to happen.
The cable pair can often react significantly to the Non-Farm Payroll report, and as it comes out later today - this could be an interesting session. If we get a strong number, this will often have Americans selling the Dollar, and reaching for other currencies such as the Pound. The pair is certainly driven by a certain amount of risk appetite, and as a result - the better the jobs number, the more traders are willing to bet on riskier assets.
The pair could very well react suddenly to the number, but the reality is that unless the Non-Farm Payroll is an absolute blowout in either direction, the move will probably reverse in the course of the next few hours. The recent history of the NFP announcements seems to suggest this is rapidly becoming the norm. In fact, employment isn't what the market is focusing on. (We all know it isn't good.)
The Pound is overbought; there is no doubt about it. A daily close below that hammer would be the safest of all shorts at this point, but there is little chance of that happening on Friday alone. If it does - this would be bad news. More likely, we could see a sell signal in the form of a spike higher, and a failure at the 1.59 - 1.60 area. If this happens, there could be a short-term trade in shorting that unsustainable spike. Otherwise, this pair is simply sitting between two are that are far too close to trade around as the resistance starts at 1.59, and the support starts at 1.58 or so.
GBP/USD Forecast February 3, 2012, Technical Analysis
GBP/USD Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3