GBP/USD: post NFP, bid then offered, now bid again back on 1.31 handle

• GBP/USD initially spiked on the nonfarm payrolls negative details.
• GBP/USD reverses on positive revisions. 
• US 10-year yields also recover from post jobs data lows on revisions.
• Fed hike still on the cards?
• DXY recovery capped, GBP back on the bid.

Currently, GBP/USD is trading at 1.3108, up 0.36% on the day, having posted a daily high at 1.3134 and low at 1.3039. The nonfarm payrolls was a complicated outcome, which at first was seen as negative and selling the dollar played out on the knee-jerk, but when the background of the report was studied and digested, it still backed the case for a Dec Fed hike and sterling reversed its gains to back below the 1.31 handle as the dollar recovered. However, at the time of writing, sterling is back onto the 1.31 handle in a volatile market that is still digesting the report with some fresh weakness in the DXY, sold off from recovery highs and capped at 94.64.

US: Total nonfarm payroll employment rose by 261,000 in October

Here's the detail of the nonfarm payrolls report:

• Headline: 252K vs +302K expected
• Unemployment rate: 4.1% vs 4.2% expected (lowest since 2001)
• Participation rate: 62.7% vs 63.1% prior
• Average hourly earnings m/m 0.0% vs +0.2% expected
• Average hourly earnings y/y 2.4% vs +2.7% expected

Positive detail:

• 90,000 upward revisions (prior two-months)
• Underemployment is now just 7.9% (down from 8.3% last month), thus wages seen to increase

Strong US employment, but modest wages backs "gradual" Fed hikes - ING

Overall, the report leaves the door open for a Fed hike in December and with Powell confirmed as the new Fed Chair in 2018, taking over Yellen on the 3rd Feb, who regards inflation as normalising towards the 2% target, markets are expecting a similar interest rate path of tightening with him at the helm, so more rate hikes are expected in 2018 as well.

Fed: Powell nomination for the next Fed Chair will not be a game changer - Rabobank

GBP/USD levels

Analysts at Scotiabank explained that GBP/USD appears to have found near-term support in the mid-1.30 area. "The channel implies support around 1.3020. We look to near-term gains back toward the mid-lower 1.31 area," the analysts added. Meanwhile, on the upside, analysts at Commerzbank explained that above 1.3343 (50% retracement) would trigger a deeper recovery to potentially 1.3417/1.3515, the 61.8% and the 2014-2017 downtrend.

If the dollar continues higher, the downside in cable eyes 1.3027 as the one month low. Then, the 1.2995 2016-2017 uptrend line guards the 200-DMA at 1.2854, ahead of 1.2830 as a 38.2% retracement before the 1.2575 as a 50% retracement.