Bearish View
- Sell the GBP/USD pair and set a take-profit at 1.2845.
- Add a stop-loss at 1.3050.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 1.3000 and a take-profit at 1.3100.
- Add a stop-loss at 1.2845.
The GBP/USD pair continued its downward trend after peaking at 1.3431 in September to a low of 1.2845, its lowest point since August 15. It has dived by 3.60% from its highest level in September.
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Federal Reserve and Bank of England Decisions
The GBP/USD pair was trading at 1.3430 as traders waited for the upcoming Federal Reserve and the Bank of England decisions.
Economists expect the Fed to cut interest rates by 0.25% to between 4.75% and 5.0% after slashing them by 0.50% in its September meeting.
The odds of more cuts rose as concerns about the labor market continued after last Friday’s nonfarm payrolls (NFP0 data.
These numbers were significantly different from those released in October, which showed that the economy created over 254k jobs. According to the Bureau of Labor Statistics (BLS), the economy created just 12,000 jobs in October, while the unemployment rate rose to 4.1%. Therefore, the bank hopes that another rate cut will help to increase hiring in the economy.
The Bank of England is also expected to deliver the second interest rate cut of the year when it meets on Thursday. Economists expect the bank to cut rates by 0.25% to 4.75%, and point to more cuts in the coming months.
The biggest GBP/USD news will be the upcoming US election, which will determine the economic policy of the United States. Trump has pledged wider changes, including ramping up his trade wars and tax cuts.
Economists expect that Trump’s policies will lead to a big US budget deficit, which will add to the total debt than Harris.
The key economic numbers to watch will be the upcoming US services and non-manufacturing PMI numbers by S&P Global and ISM.
GBP/USD Technical Analysis
The daily chart shows that the GBP/USD exchange rate has pulled back in the past few weeks. It retreated from 1.3430 in September and bottomed at 1.2845 last week. It is hovering at the ascending trendline that links its lowest levels since April this year.
The pair has also dropped below the 23.6% Fibonacci Retracement level and the key level at 1.3043, its highest swing in July.
Also, the percentage price oscillator (PPO) has moved below the zero line. Therefore, the path of the least resistance for the pair is bearish, with the next point to watch being the 50% retracement point at 1.2735.
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