GBP/USD Analysis: Bulls struggle to seize control despite hawkish BoE, focus shifts to NFP

• The BoE policy decision triggered some intraday volatility around GBP/USD on Thursday.
• The upbeat outlook for the UK economy, sustained USD helped limit losses for the pair.
• The risk stemming from Scottish elections held bulls from placing fresh bets ahead of NFP.

The GBP/USD pair witnessed some intraday volatility on Thursday after the Bank of England announced its monetary policy decision. As was widely anticipated, the BoE left the benchmark interest rate and Asset Purchase Facility unchanged at 0.10% and £895 billion, respectively. However, the lack of clarity on future tapering plans exerted some downward pressure on the British pound. The early downtick, however, turned out to be short-lived and was quickly bought into near the 1.3855 area in the wake of more upbeat economic forecasts.

The UK central bank predicted that the economy will rebound at its fastest pace since WW-II and the 2021 GDP growth estimate was revised higher to 7.25% from 5.0% previous. The BoE sees inflation averaging 2.5% in 2021 and slowed the pace of weekly bond-buying to £3.4 billion from £4.4 billion in order to meet its year-end target of £875 billion. The optimistic economic outlook, along with the tapering of the weekly bond underpinned the sterling. Apart from this, the emergence of heavy US dollar selling pushed the pair to fresh weekly tops.

Expectations that the Fed will keep interest rates low for a longer period continued acting as a headwind for the USD. Apart from this, the underlying bullish sentiment in the financial markets further dented the greenback's safe-haven demand and assisted the pair to attract some dip-buying. Even the upbeat US economic data, showing that Initial Weekly Jobless Claims dropped to the lowest level since March 14, failed to impress the USD bulls. That said, the uncertainty over the outcome of the Scottish parliament election kept a lid on any strong gains for the major.

The results from several polls are expected from around noon on Friday and the remaining votes will be counted on Saturday. If the Scottish Nationalist Party, or SNP, wins an overall majority in the elections, first minister Nicola Sturgeon has promised to demand a second referendum on independence from the UK. This will now play a key role in driving the sentiment surrounding the GBP. Nevertheless, the pair retreated over 50 pips from daily swing highs and finally settled with modest losses, just below the 1.3900 mark, though lacked any follow-through selling.

The pair managed to regain positive traction during the Asian session on Friday amid sustained USD selling. There isn't any major market-moving economic data due for release from the UK. Hence, the key focus will remain on the closely-watched US monthly jobs report – popularly known as NFP. This may provide clues on when the Fed would scale back its stimulus, which, in turn, should influence the near-term USD price dynamics and produce some meaningful trading opportunities on the last day of the week.

Short-term technical outlook

From a technical perspective, the overnight positive move faltered near a resistance marked by a near two-week-old descending trend-line. The mentioned barrier is pegged just ahead of mid-1.3900s, which should now act as a key pivotal point for short-term traders. A sustained move beyond should allow bulls to make a fresh attempt towards conquering the key 1.4000 psychological mark. Some follow-through buying has the potential to lift the pair towards an intermediate hurdle near the 1.4080 region en-route the 1.4100 mark. The momentum could further get extended towards 2021 daily closing highs resistance near the 1.4135-40 region.

On the flip side, the overnight swing lows, around the 1.3855 region now seems to protect the immediate downside. This is followed by support near the 1.3835-30 region, marking the 50% Fibonacci level of the 1.3669-1.4009 move up, ahead of the 1.3800 mark. Failure to defend the mentioned support levels will be seen as a fresh trigger for bearish traders. The pair might then accelerate the slide towards the 1.3720-15 intermediate support en-route the 1.3700 round-figure and April monthly swing lows, around the 1.3670 region.