Bearish view
- Sell the GPB/USD pair and set a take-profit at 1.2863.
- Add a stop-loss at 1.3135.
- Timeline: 1-2 days.
Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.3135.
- Add a stop-loss at 1.2863.
The GBP/USD exchange rate’s sell-off accelerated on Tuesday morning as traders embraced a risk-off sentiment in the market. The pair slipped below the important support level at 1.300, falling to its lowest point since August 19.
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Risk-off sentiment continues
The GBP/USD pair’s downtrend gained steam as a sense of fear returned in the market, leading to more US dollar inflows.
The US dollar index continued its strong rally, reaching a high of $103.80, its highest point since August 2. It has jumped by over 3.85% from its lowest level this year.
US equities also resumed their downtrend, with the Dow Jones index falling by over 400 points to $42,900, while the S&P 500 erased 25 points.
There was no immediate catalyst for the GBP/USD pair retreat. A likely reason is the view that the Bank of England (BoE) will restart cutting interest rates since the country’s inflation has dropped below the 2% target.
GBP/USD forecast suggests further movements may hinge on this expectation.The bank’s rate cut will be aimed at supercharging an economy that is doing better than expected. Data released last week showed that the retail sales boomed in September. The headline sales rose by 3.9% YoY, while core sales rebounded by 4.0%.
Another report showed that the UK economy returned to growth in August after flatlining in the previous two months.
The Fed, on the other hand, is expected to be less dovish after the recent strong economic numbers. The data showed that the unemployment rate dropped to 4.1% in September, while inflation dropped to 2.4%.
GBP/USD technical analysis
The GBP/USD pair has sold off sharply in the past few days. It has dropped below the first support of the Woodie pivot point at 1.3160.
The pair has remained slightly above the lower side of the Bollinger Bands. Also, the Stochastic Oscillator has moved to the oversold level.
On the other hand, the Average Directional Index (ADX) rose to 31, meaning that the downtrend is strengthening. It has also moved below the Ichimoku cloud indicator and the key support at 1.3138, its highest point in July last year.
Therefore, the pair will likely continue falling as traders eye the next point at 1.2863, the second support of the Woodie pivot point.
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