Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.3260.
- Add a stop-loss at 1.3000.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.3075 and a take-profit at 1.3000.
- Add a stop-loss at 1.3200.
The GBP/USD currency pair dropped to an important support level after the mixed UK jobs numbers and as crude oil prices continued falling. The pair retested the crucial support at $1.3045, its highest swing in July.
Crude oil prices and UK jobs data
The Office of National Statistics (ONS) published mixed jobs numbers, raising the expectation that the Bank of England (BoE) will continue cutting interest rates in the upcoming meetings.
The data showed that the unemployment rate retreated from 4.2% to 4.1% in July while the employment change in the three months to July rose by over 265,000. However, wage growth decelerated during the month with the average earnings index with bonus slowed to 4.0% from the previous 4.6%.
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The next important data will come out on Wednesday morning when the ONS publishes the latest GDP numbers. Economists expect the data to show that the economy expanded by 0.2% in July and by 1.4% from the same quarter in 2023.
The UK’s economy has been more resilient than expected, with the country avoiding a recession as most analysts were expecting. Still, the biggest challenge is that the government’s budget has a £22 billion hole that needs to be filled.
The GBP/USD pair also reacted to the falling crude oil prices. Brent, the global benchmark, crashed below $70 for the first time this year while the West Texas Intermediate (WTI) fell to $65.
This performance will be welcomed by policymakers as it means that inflation will continue falling since energy is a major contributor. Economists expect the upcoming Consumer Price Index (CPI) to drop from 2.9% to 2.6% in August while the core CPI fell from 3.2% to 3.1%. These numbers will confirm the view that the Fed will start cutting rates in its next week’s meeting.
GBP/USD technical analysis
The GBP/USD exchange rate has been in a slow downtrend in the past few days. It dropped from the year-to-date high of 1.3262 and retested the key support at 1.3046, its highest point on July 17. This performance is known as a break and retest pattern and is a popular continuation sign.
The pair has remained above the 50-day moving average while the MACD indicator has moved above the neutral point. It has also formed a bullish flag chart pattern, a popular bullish sign. Therefore, it will likely continue rising as bulls target last week’s high of 1.3262.
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