GBP/USD consolidates daily gains below 1.33, Yellen speech eyed

The GBP/USD pair rose to a fresh daily peak at 1.3290 in the last hour before starting to consolidate its daily gains ahead of Fed Chairwoman Janet Yellen's speech later in the session. As of writing, the pair was trading at 1.3270, up 0.25%, or 35 pips, on the day.

After closing the previous day with small losses, the US Dollar Index extended its correctional drop to a new 2-day low at 93.10 before the macroeconomic data releases from the U.S. According to the ADP, private sector employment increased by 135,000 on a monthly basis in September following a 228,000 (revised from 237,000) increase in August, reflecting the negative impact of hurricanes Harvey and Irma. Despite that retreat, however, the number came in above the market estimate of 125,000. 

• US: Private Sector Employment Increased by 135,000 Jobs in September - ADP

Moreover, the non-manufacturing PMI data released by the ISM jumped to its highest level since 2005. Commenting on the data, ING Chief International Economist James Knightley noted, "the non-manufacturing survey shows business activity jumping five points while new orders jumped six points – the index has only been higher on two occasions in the past twelve years. Employment is also looking very strong at 56.8 versus the 50 break-even level, which gives us confidence to assert that any softness in Friday’s payrolls report relating to hurricane effects will be swiftly reversed in coming months."

• US: Economic activity in the non-manufacturing sector grew in September - ISM

The CME Group FedWatch Tool's December rate hike probability edged higher above 80% after the data, lifting the US Dollar Index to 93.40 and helping it retrace daily losses. Nevertheless, the index is now at 93.32, losing 0.1%, as investors get ready for Yellen's opening remarks at the St. Louis Fed-sponsored conference titled "Community Banking in the 21st Century ." Although the speech is scheduled to last only 15 minutes, any comments on the monetary policy outlook could cause sharp fluctuations in the DXY.

Technical outlook

The pair could face the first technical hurdle at 1.3300 (psychological level) ahead of 1.3420 (20-DMA) and 1.3500 (psychological level). On the downside, supports align at 1.3200 (psychological level), 1.3140 (50-DMA) and 1.3040 (100-DMA). Despite today's modest recovery, the RSI indicator on the daily graph remains near the 50 mark, suggesting a near-term neutral outlook.