Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.3253.
- Add a stop-loss 1.3500.
- Timeline: 1-2 days.
Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.3500.
- Add a stop-loss at 1.3253.
The GBP/USD exchange rate bounced back as the recent trade worries eased and as traders braced for more interest rate cuts by the Federal Reserve. It rose to a high of 1.3400 from this month's low of 1.3251 as traders waited for the upcoming UK macro data.
The GBP/USD pair rose as more Federal Reserve officials reiterated Jerome Powell’s view that the Federal Reserve may cut interest rates more as economic conditions worsens amid the ongoing government shutdown.
In a statement,. Stephen Moran, who became Fed Chair recently, urged other officials to back more cuts to protect the labor market, which has been worsening in the past few months.
A recent report by ADP showed that the economy lost 36,000 jobs in September, a situation that will get worse as the government fires 10,000 workers during the shutdown.
A key issue that the Federal Reserve faces is that inflation is still a major challenge, especially if the new tariffs between the US and China goes on. Trump has suggested adding a 130% tariff on imports, a move that will boost prices as China is a major source of goods used in the US.
The next key GBP/USD news will be Federal Reserve officials statements. Some of the officials who will talk later today are Michael Barr, Christopher Waller, and Michele Bowman. Also, the US will release the Philadelphia Fed Manufacturing Index data.
The GBP/USD pair will also react to the upcoming UK macro data, which will shed color on the state of the economy. The Office of National Statistics (ONS) will publish the latest GDP, manufacturing and industrial production, and trade numbers.
GBP/USD Technical Analysis
The daily timeframe chart shows that the GBP/USD exchange rate bottomed at 1.3253 on Monday and then bounced back to 1.3400 today.
The pair remains below the September high of 1.3721 and the 50-day Exponential Moving Average (EMA) at 1.3428. It has also formed a head-and-shoulders pattern and has now retested the neckline.
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The MACD indicator remains below the zero line and the two lines are facing downwards. Therefore, the pair will likely continue falling as sellers target the next key support level at 1.3253. A drop below that level will point to more downside, potentially to the support at 1.3141, its lowest level in August.
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