Bearish view
Sell the GBP/USD pair and set a take-profit at 1.3272.
Add a stop-loss at 1.3425.
Timeline: 1-2 days.
Bullish view
Buy the GBP/USD pair and set a take-profit at 1.3425.
Add a stop-loss at 1.3272.
The GBP/USD pair suffered a big reversal after the Bank of England (BoE) delivered a hawkish interest rate decision and after the US published a strong nonfarm payrolls (NFP) report. It dropped to 1.3350, down by 153 pips from the highest point this month.
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US Consumer Inflation Report Ahead
The GBP/USD pair slumped on Friday after the US released stronger-than-expected nonfarm payrolls (NFP) data. The report showed the unemployment rate fell to 4.1% in October from 4.2% in September. The economy added 165k jobs in October, up from 60k in September, which had itself been revised up from the 29k initially reported. These figures also beat the ADP report, which showed the private sector adding only 80k jobs.
Looking ahead, the market will react to the upcoming US inflation report on Tuesday. Economists expect the upcoming report will show that the headline consumer inflation rose 3.7% in October, much higher than the median estimate of 2.0%. Core inflation, which excludes the volatile food and energy prices, is expected to come in at 2.6% after rising by 2.5% in the previous month.
These numbers will help the Federal Reserve when making its interest rate decision in December. Economists expect the bank to hike interest rates to between 4.0% and 4.25% in the December meeting. Such a move will help to lower inflation, which has remained above 2% in the last five years.
The GBP/USD pair also fell as the Bank of England (BoE) announced its interest rate decision. Policymakers voted to raise rates by 25 basis points. Traders on Polymarket are divided on what to expect at the December meeting, with the odds of another hike rising to 45% and the odds of rates staying unchanged at 55%.
GBP/USD Technical Analysis
The daily chart shows that the GBP/USD pair has been in a strong upward trend in the past few weeks, moving from a low of 1.3137 in October to a high of 1.3501 last week. It initially jumped after the Bank of England decision and then pulled back after the US nonfarm payrolls data. It reached to a low of 1.3350, a few pips below the 50-day Exponential Moving Average (EMA).
The pair has also settled along the 61.8% Fibonacci Retracement level of 1.3343. Therefore, there is a likelihood that it will attempt to bounce back as investors buy the dip and then resume the downward trend.
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