Sterling rose 0.12% on Wednesday as the Dollar fell for a second session after softer US labour data, with GBP/USD around 1.3467. ADP’s July Employment Change slowed to 44K from 98K, undershooting the 70K forecast; education and health services added 36K, while leisure and hospitality shed 11K. Services activity stayed in growth territory as ISM Services PMI edged up to 54.1 from 54, though it missed the 54.5 consensus. Within the survey, the Employment diffusion index slid to 47.4 from 51.2, while Prices Paid climbed to 70.3 from 67.7, extending the run to 110 months.
Attention now turns to Friday’s Nonfarm Payrolls, where markets expect 80K jobs in July versus 57K in June, and an Unemployment Rate of 4.2%. Separately, UK Treasury officials are reported to be exploring ways to raise billions of GBP within fiscal rules, while S&P Global data showed the UK services sector returned to expansion last month after contracting in June. In technical terms, GBP/USD was cited near 1.3463, holding above an SMA cluster around 1.3364, with RSI near 57; resistance levels referenced included 1.3525 and 1.3551, and support points 1.3443, 1.3312.
Derivative Trading Strategies Ahead Of Nonfarm Payrolls
We advise derivative traders to brace for heightened volatility as we approach Friday’s crucial Nonfarm Payrolls (NFP) release. With the July ADP report plunging to just 44,000 against the 70,000 forecast, we expect a potential discrepancy in the official payroll numbers. Historically, large gaps between ADP and NFP data spark sharp swings, making short-term straddles an attractive play for option traders.
From a technical standpoint, we see GBP/USD holding a strong bullish bias above the 1.3443 level, with key moving averages clustered around 1.3364. Traders should consider buying call options targeting the next resistance level near 1.3525, while keeping strict stop-losses on futures positions just below the 1.3312 structural floor. If the NFP print misses the 80,000 estimate, a rapid surge toward 1.3550 is highly probable.
Outlook For Sterling And Dollar Amid Policy Divergences
We must also monitor the contrasting stances of Federal Reserve policymakers, which continue to create uncertainty around the Dollar’s direction. With the U.S. service sector employment index contracting to 47.4, pressure is mounting on the Fed, whereas the UK’s services sector is showing renewed expansion. This divergence suggests we should favor long sterling positions in the coming weeks, especially as geopolitical relief further supports risk-sensitive assets.
