Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.3150.
- Add a stop-loss at 1.3500.
- Timeline: 1-2 days.
Bullish view
- Set a sell-stop at 1.3365 and a take-profit at 1.3300.
- Add a stop-loss at 1.3450.
The GBP/USD currency pair retreated as geopolitical risks rose and after a relatively hawkish statement by Jerome Powell, the Federal Reserve chair. It retreated to a low of 1.3370, a few points below the year-to-date high of 1.3432.
US bond yields rise
The GBP/USD pair retreated slightly after US Treasury yields rose to the highest point in two weeks after Powell hinted that the Fed would cut rates gradually. The two-year Treasuries rose to 3.67% while the 10-year jumped to 3.8%.
It was his first statement since the Federal Reserve slashed interest rates by 0.50% in the last monetary policy meeting. Other Fed officials who have talked recently have supported a gradual pace of cuts.
His statement came ahead of the upcoming US job numbers. The Bureau of Labor Statistics (BLS) will publish the latest JOLTs job vacancies data on Tuesday. These numbers are expected to show that the number of job openings dropped to 7.64 million in August, the lowest point in over three years.
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ADP, the biggest payroll processing company in the US, will release the latest private payrolls data on Wednesday followed by the official BLS jobs numbers on Friday.
The Fed has hinted that it was now focusing on the labor market instead of inflation, which is moving towards the 2% target.
The other important GBP/USD data to watch will be Tuesday’s US manufacturing PMI numbers by S&P Global and the Institute of Supply Management (ISM).
Meanwhile, in the UK, the Bank of England is expected to resume cutting interest rates in the next meeting on November 7.
GBP/USD technical analysis
The GBP/USD exchange rate has been in a strong bullish trend in the past few weeks. It has risen from last year’s low of 1.2035 to a high of 1.3435, the first resistance of the Woodie pivot point.
The pair has moved above the key resistance point at 1.3265, its highest point on August 27. It has also risen above the key resistance level at 1.3140, its highest swing in July last year.
The pair has risen above the 50-day moving average while the MACD indicator has risen above the neutral level. Also, the Relative Strength Index (RSI) has continued rising.
It has also formed a series of higher highs and higher lows. Therefore, the pair will likely retest the support at 1.3140 and resume the bullish trend.
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