Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.3040.
- Add a stop-loss at 1.3265.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.3130 and a take-profit at 1.3265.
- Add a stop-loss at 1.3050.
The GBP/USD currency pair erased some of its recent gains as the recent US dollar index crash eased. It retreated to 1.3125, its lowest point since August 23rd and 1% below its highest level last month.
US dollar index bounces back
The US dollar weakness was a major theme in the forex market last month after the Federal Reserve pointed to a rate cut. It dropped to a low of $100.52, down sharply from the year-to-date high of over $106.
The Fed minutes released in August showed that some Fed officials favored cutting rates in the last meeting. The rest favored holding rates steady and maintaining a focus on inflation and jobs data.
Top Forex Brokers
In a statement at the Jackson Hole Symposium, Jerome Powell confirmed that the bank would start cutting rates in its September meeting.
The Fed has started to focus on the labor market, which has showed signs of weakening. The recent non-farm payroll (NFP) data revealed that the unemployment rate rose to 4.3% in July, the highest point since 2021.
Therefore, this week’s NFP numbers will provide more color about the state of the economy. Economists expect the report to show that the unemployment eased slightly to 4.2% in August as the economy added 145k jobs.
With the US markets closed on Monday, the GBP/USD pair will react to the latest UK manufacturing PMI data. Based on the flash manufacturing PMI released in August, analysts expect the data to show that the PMI rose to 52.5. A PMI figure of 50 and above is a sign that a sector is improving.
The UK economy has been more resilient than most analysts were expecting, helped by the robust consumer spending.
GBP/USD technical analysis
The GBP/USD pair peaked at 1.3265 last month as the British pound surged and the US dollar index retreated. It then erased some of those gains as some bulls started to take profits.
The pair’s highest point last month coincided with the second resistance of the Woodie pivot point. It is now nearing the first support at 1.3070 and the key support point at 1.3040, the highest point on July 17.
The pair has remained above the 50-day moving average while the RSI is pointing downwards and has moved to 61. Therefore, the pair will likely drop and retest the key support at 1.3040 and then resume the uptrend.
Ready to trade our free daily Forex trading signals? We’ve shortlisted the best UK forex brokers in the industry for you.