Bullish view
- Set a buy-stop at 1.1480 and a take-profit at 1.1800.
- Add a stop-loss at 1.1100.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.1180 and a take-profit at 1.1050.
- Add a stop-loss at 1.1250.
The GBP/USD price pulled back sharply as the recent rally took a breather. After rising to a high of 1.1496 on Tuesday, the pair pulled back to a low of 1.1228 in the overnight session. It remains significantly above last week’s low of 1.0355.
UK economic concerns remain
The GBP/USD price pulled back as jitters about the UK economy continued. This decline continued after the new prime minister made a speech at the Tory party conference in which she aimed ay reassuring th markets.
In her speech, Truss reaffirmed a commitment to ensure fiscal discipline even as she implements nore spending and tax cuts. She has already announced tax cuts worth over 45 billion pounds. On Monday, the government said that it will eliminate the tax cut for higher income earners, which will save between 2 billion and 3 billion pounds.
Therefore, the pair declined because the prime minister did not provide details about how it will maintain fiscal discipline going forward.
Meanwhile, the GBP/USD price declined because of the strong US dollar following strong economic data from the US. Numbers by ADP said that the country’s private sector created more than 208k jobs in September after it added 185k in the previous month. This increase was much higher than the median estimate of 200k.
Additional data showed that the country’s trade deficit narrowed in August as energy exports rose and imports declined. Imports fell bt about $4 billion to $326 billion while exports fell to $258 billion. In total, the country’s trade deficit narrowed to $67 billion.
The services sector performed strongly as well. According to S&P, services PMI increased from 43.7 to 49.3 while the ISM showed that non-manufacturing PMI fell slightly to 59.1. These numbers point to more tightening by the Federal Reserve.
GBP/USD forecast
The GBP/USD pair has been in a strong bullish trend in the past few days. It rose and found some challenges moving above the first resistance of the standard pivot point. The pair remains slightly above the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved below the overbought level.
It will likely resume the bullish trend as buyers attempt to move to the second resistance at 1.1800. This view will be confirmed if the pair manages to move above this week’s high of 1.1480.
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