Bearish View
- Sell the GBP/USD pair and set a take-profit at 1.3000.
- 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 1.3000.
The GBP/USD exchange rate pulled back and hit its lowest level since April, continuing a downtrend that started in September when it peaked at 1.3725.
Sterling Drops After Federal Reserve Decision
The GBP/USD pair retreated after the Federal Reserve delivered the latest interest rate decision. As was widely expected, the bank decided to cut interest rates by 0.25% as concerns about the labor market continued.
This decision came during the ongoing government shutdown and as some top companies announced large layoffs. Amazon, UPS, and Target announced thousands of layoffs, weeks after a report by ADP showed that the economy lost over 36,000 jobs in September.
The main reason why the GBP/USD dropped is that the decision was more hawkish than what analysts were expecting. In his statement, Jerome Powell maintained that the bank was still concerned about inflation. As such, he warned that the bank may not cut interest rates as most analysts were expecting.
Top Regulated Brokers
The GBP/USD pair will be in focus this week as the Bank of England (BoE) delivers its interest rate decision on Thursday. This decision comes a few weeks after a report showed that the headline Consumer Price Index (CPI) rose to a multi-month high in September.
This inflation report suggested that the country was in stagflation, which is the most difficult situation for a central bank to be in.
Economists expect the bank to leave interest rates unchanged and possibly point to a cut in December. The other top macro data to watch from the UK will be the manufacturing and services PMIs and housing numbers.
GBP/USD Technical Analysis
The daily chart shows that the GBP/USD pair has moved downwards in the past few months. It has dropped from a high of 1.3724 in September to the current 1.3140.
The pair has moved below the 50-day Exponential Moving Average. Also, the Relative Strength Index (RSI) has moved to the oversold level of 30.
Sterling has also moved below the Supertrend and the Ichimoku cloud indicator. Therefore, the path of the least resistance is bearish, with the next key point to watch being the psychological point at 1.3000. A move above the resistance level at 1.3250 will invalidate the bearish outlook.
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