Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.3150.
- Add a take-profit at 1.3300.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.3225 and a take-profit at 1.3300.
- Add a stop-loss at 1.3150.
The British pound continued its remarkable surge, rising to its highest level since March 2022 as investors embraced the new normal of central banks easing. The GBP/USD currency pair soared to a high of 1.3217 as the greenback sell-off gained steam.
Fed and Bank of England cuts
The GBP/USD exchange rate continued soaring after Jerome Powell confirmed what the market was expecting all along. Speaking at the closely-watched Jackson Hole Symposium in Wyoming, Powell said that the bank was inclined to cut interest rates in September.
His statement was echoed by other Fed officials who spoke at the symposium, including Mary Daly and Chicago’s Austan Goolsbee.
The Fed’s main concern is that the labor market has weakened substantially in the past few months, with unemployment rising to 4.3%, its highest point since 2021.
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Additionally, there are signs that the non-farm payrolls (NFP) numbers released this year have overstated the real situation in the labor market. Last week, the Bureau of Labor Statistics revised the number of jobs created for the 12 months through March downwards.
The US will publish two important reports this week: consumer confidence and personal consumption expenditure (PCE) data. These numbers will provide more information about the state of the economy but will likely not change the Fed’s dovish tone.
The GBP/USD pair continued rising after the strong economic numbers from the UK. In a report on Thursday, S&P Global said that the flash composite PMI rose to 53.4 in August from 52.8 in the previous month.
The figure was higher than expected and was the highest it has been since July last year, meaning that the economy was doing well with inflation falling and the labor market still tight.
GBP/USD technical analysis
The GBP/USD pair rose for two consecutive week, reaching its highest swing since March 2022. On the weekly chart, it rose above the crucial resistance level at 1.3150, its highest level last year. It was also the upper side of the ascending triangle chart pattern.
It is approaching the important 78.6% Fibonacci Retracement point. The pair has also remained above the 50-week Exponential Moving Average (EMA), meaning that it has a bullish momentum.
Therefore, there are two potential scenarios. First, the pair may continue the bullish trend and retest the psychological point at 1.3300. Second, with the pair getting overbought, a pullback may happen as some bulls start to capitulate.
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