Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.2000.
- Add a stop-loss at 1.2150.
- Timeline: 1 day.
Bullish view
- Set a buy-stop at 1.2100 and a take-profit at 1.2165.
- Add a stop-loss at 1.200.
The British pound continued its relentless sell-off as the US dollar momentum gained steam. The GBP/USD pair retreated to a multi-month low of 1.2073, much lower than the year-to-date high of 1.3147.
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US dollar index rally continues
The US dollar index (DXY) continued its recent rally as investors embraced a risk-off sentiment. The index soared to a high of $107.20, the highest level since November 2022. It has soared by more than 7.60% from its lowest level this year.
The greenback rally accelerated after the latest JOLTs job openings data. According to the Bureau of Labor Statistics (BLS), the number of job vacancies rose to more than 9.61 million in August, higher than the previous month’s 8.92 million. This increase was higher than the median estimate of 8.8 million.
These numbers mean that the Federal Reserve could continue hiking rates in the next meeting in November. If this happens, it will push rates to between 5.50% and 5.75%, the highest point in more than two decades.
As a result, investors have moved to the safety of the US dollar while dumping American stocks and bonds. The Dow Jones crashed by over 500 points while the Nasdaq 100 shed over 256 points. At the same time, the long-term bonds continued their sell-off. The 10-year yield rising to 4.80% and the 30-year jumped to 4.93% and could hit 5% soon.
The biggest focus among investors will be the US bond market. The GBP/USD pair will react to the upcoming UK and US services PMI numbers. Economists expect the data to show that the UK PMIs dropped below 50 in September.
In the US, economists see the services PMI falling to 50.2. The other key movers will be the latest ADP jobs data and the OPEC+ meeting.
GBP/USD technical analysis
The GBP to USD pair continued its freefall in the past few months. It has slipped below the important support at 1.2313, the lowest level on May 25th. The 200-day and 50-day moving averages are also about to form a death cross while the Relative Strength Index (RSI) moved to the oversold level.
The Stochastic Oscillator has also moved to the oversold level. Therefore, the pair will likely continue falling, with the next target being the psychological level at 1.200.
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