Sellers look to hold on as GBP remains below 1.3100

• GBP/USD is trading at its lowest level in over two weeks below 1.3100.
• Improving risk sentiment could help the pair limit its losses.
• Buyers may stay on the sidelines as 1.3100 holds as resistance.

GBP/USD was under bearish pressure in the US session on Friday and erased its gains to end the week flat. The pair continues to decline at the start of the new week and was last seen trading at its lowest since August 22 below 1.3100.

Despite weak labor market data, the US dollar (USD) benefited from the intense flight to safety seen before the weekend and forced GBP/USD lower.

The U.S. Bureau of Labor Statistics said Friday that nonfarm payrolls rose by 142,000 in August. This reading followed the 89,000 increase (revised from 114,000) recorded in July and fell below the market forecast of 160,000. Other details of the report showed that the unemployment rate fell to 4.2 percent as expected, while annual wage inflation, as measured by the change in average hourly earnings, rose to 3.8 percent from 3.6 percent.

In Monday’s European session, the U.K.’s FTSE 100 rose more than 0.5 percent on the day, with U.S. stock index futures up between 0.4 percent and 0.75 percent. In the absence of high-level macroeconomic data, the USD may struggle to hold on to its strength if risk flows dominate financial market action in the second half of the day.

On Tuesday, the UK’s Office for National Statistics will release employment data. August US consumer price index (CPI) data will be analyzed by market participants on Wednesday.

GBP/USD Technical Analysis

GBP/USD closed a 4-hour candle below its 100-period simple moving average (SMA) for the first time since mid-August. Meanwhile, the Relative Strength Index (RSI) indicator on the 4-hour chart remains near 30, suggesting the pair is close to turning oversold.

If 1.3100 (100-period SMA) remains intact as resistance, sellers could look to maintain control of GBP/USD action. On the downside, 1.3040 (Fibonacci retracement level 38.2% of last uptrend) lines up as next support before 1.3000 (psychological level, static level) and 1.2960-1.2970 (Fibonacci retracement 50% , 200-period SMA).

If GBP/USD manages to break 1.3100 into support, it could face the next resistance at 1.3130 (23.6% Fibonacci retracement) before 1.3150 (50-period SMA) and 1.3200 ( psychological level, static level).