Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.3600.
- Add a stop-loss at 1.3320.
- Timeline: 1-2 days.
Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.3320.
- Add a stop-loss at 1.3600.
The GBP/USD exchange rate held steady on Tuesday as traders focused on the happenings in the United States, which is going through a government shutdown. It was trading at 1.3485, up from last month’s low of 1.3320.
US Government Shutdown Continues
The GBP/USD pair rose slightly as the US government shutdown continued, putting the risk of more economic weakness. Donald Trump and the White House intensified their threat of more layoffs in the coming days if the shutdown continues.
Mass layoffs will worsen the already fragile labor market. A report released by ADP last week revealed that the economy lost 36,000 jobs in September after shedding 3,000 more in the previous month.
Another report by the ISM revealed that the services sector continued to deteriorate in September. This is a sign that the economic situation is getting worse, which may push the Fed to continue cutting rates.
The next important GBP/USD news will be a report by Halifax, which will provide more color on the housing sector. Economists expect the report to show that the house price index remained at 2.2% in September.
The pair will also react to statements from some Federal Reserve officials, who will provide more color on the next monetary policy. Some of the top officials to watch will be Raphael Bostic, Michele Bowman, and Stephen Miran.
These will be the first statements by these officials since the government shutdown started last week. They will also be the first statements after ADP published a weak jobs report.
GBP/USD Technical Analysis
The daily timeframe chart shows that the GBP/USD pair has moved sideways in the past few days. It formed a double-bottom pattern at 1.3320, whose neckline is at 1.3723.
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The pair has also formed an inverse head-and-shoulders pattern, a common bullish reversal. It is attempting to move above the 50-day Exponential Moving Average.
The Relative Strength Index has moved above the neutral point at 50. Therefore, the pair will likely continue rising as bulls target the double-bottom’s neckline at 1.3725. A drop below the support at 1.3320 will invalidate the bullish forecast.
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