Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.3000.
- Add a stop-loss at 1.3250.
- Timeline: 1-2 days.
Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.3250.
- Add a stop-loss at 1.3000.
The GBP/USD exchange rate drifted downwards after the US published strong jobs numbers on Friday. It also dropped sharply as crude oil prices soared amid the ongoing geopolitical tensions in the Middle East. It dropped to 1.3125, down by 2.25% from its lowest level this year.
Hopes of aggressive rate cuts fade
The GBP/USD pair retreated after the US published strong jobs numbers. According to the Bureau of Labor Statistics (BLS), the country’s unemployment rate retreated from 4.2% in August to 4.1% in September, better than the expected 4.2%.
More data revealed that the nonfarm payrolls (NFP) rose by 254k in September, higher than the expected 147k. It also revised the number of jobs created in August from 144k to 159k, signaling that the labor market is doing much better than what most analysts expect.
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Another part of the report showed that the average hourly earnings rose from 3.9% in August to 4.0%.
Meanwhile, there are signs that the recent inflation downtrend will ease as energy prices bounce back. Brent, the global benchmark, rose to $78.15, while the West Texas Intermediate (WTI) jumped to $75.
This recovery happened because of the ongoing crisis in the Middle East, where Israel is considering launching retaliatory attacks against Iran. Most experts believe that Israel will attack Iranian oil infrastructure, which will risk a wider war in the region.
The next important economic data will come out on Thursday when the US publishes the latest inflation report. Analysts expect the data to show that the headline CPI retreated from 0.2% to 0.1% month over month and from 2.5% to 2.3% year over year.
The GBP/USD pair will also react to the upcoming statements by several Federal Reserve officials, such as Tom Barkin and Raphael Bostic. The Fed will also publish the minutes of the last meeting.
GBP/USD technical analysis
The GBP/USD exchange rate peaked at 1.3430 last month and has suffered a big reversal to 1.3125, its lowest point on September 16.
It has found a strong support at the 50-day Exponential Moving Average (EMA). The pair has also found support along the lower side of the ascending channel.
Meanwhile, the two lines of the MACD indicator have formed a bearish crossover, while the Relative Strength Index (RSI) has moved below the neutral point at 50.
Therefore, a break below the 50 moving average and the ascending trendline will indicate more downside, with the next point to watch being 1.3000.
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