Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.300.
- 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 1.300.
The GBP/USD exchange rate retreated to its lowest level in months after forming a double-top pattern as the US dollar momentum continued. It dropped to a low of 1.3100, much lower than the September highest point in September.
The GBP/USD pair has crashed because of the ongoing US dollar strength. The greenback has been rising after bottoming in September this year. These gains continued after the Federal Reserve slashed interest rates for the second consecutive meeting.
Some Fed officials hinted that they were still concerned about the country’s inflation. In a statement on Monday, Austan Goolsbee warned that inflation had remained above the bank’s target of 2.0% for too long. He hinted that he will not support another cut in December.
There will be key catalysts for the GBP/USD pair in the next few days. The most notable one will be the upcoming US private payrolls data by ADP. This report will help the Federal Reserve when making its interest rate decision in December.
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The pair will react to the upcoming Supreme Court case on Donald Trump’s tariffs. The court will have the first oral arguments on Wednesday. While its decision will come months later, the judges’ questions will provide hints on its ultimate decision.
The other key GBP/USD news will be the upcoming Bank of England (BoE) interest rate decision on Thursday.
GBP/USD Double-Top Points to More Downside
The daily chart shows that the GBP/USD pair has been in a strong downtrend in the past few months. It has plunged from a high of 1.3725 in September to the current 1.3140.
The pair formed a double-top pattern at 1.3725 and is now trading at its neckline, the lowest point in August this year. This price coincides with the 38.2% Fibonacci Retracement level.
The price target in a double-top pattern is established by first measuring the distance from the upper side to the neckline, which, in this case is 4.23%. One then measures the same distance from the neckline, giving it a target of 1.2580.
The bearish outlook is further supported by the fact that it has dropped below the 50-day and 200-day moving averages. It has also moved below the Ichimoku cloud indicator.
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