Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.3141.
- Add a stop-loss at 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 1.3141.
The GBP/USD pair was flat on Tuesday as traders waited for a statement from Jerome Powell and other Federal Reserve officials. It was trading at 1.3336, down from the September high of 1.3725.
Jerome Powell and Andrew Bailey Statements
The GBP/USD pair remained in a tight range as traders and investors waited for the first statement from Jerome Powell since the US government shutdown started.
Powell will likely share his thoughts on the state of the American economy and what to expect in the coming meeting. In his last statement, he noted that a rate cut was not guaranteed as inflation was still a major concern.
The GBP/USD pair will also react to statements from other Fed officials like Michele Bowman, Christopher Waller, and Susan Collins. Waller and Bowman, who were appointed by Donald Trump, have been highly supportive of interest rate cuts.
The other key catalyst for the pair will be a statement by Andrew Bailey, the head of the Bank of England (BoE). He will likely share his thoughts on the state of the UK economy, which is going through stagflation.
Stagflation is a period characterized by high inflation and slow economic growth. The most recent report showed that the headline consumer inflation jumped to 3.6% in September.
The GBP/USD pair will also react to the latest UK jobs numbers. Economists expect the report by the Office of National Statistics (ONS) to show that the unemployment rate remained unchanged at 4.7% in August, while payrolls fell by 8k in September.
GBP/USD Technical Analysis
The daily timeframe chart shows that the GBP/USD pair has retreated in the past few days. It has moved from a high of 1.3727 in September to the current 1.3335. It dropped below the 23.6% retracement level at 1.3390.
The pair has also stalled at the key support at 1.3340, the neckline of the head-and-shoulders pattern. This is one of the most common bearish reversal patterns in technical analysis.
Therefore, the pair will likely continue falling as sellers target the key support at 1.3140, its lowest point in August. This price also coincides with the 38.2% retracement level.
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Crispus Nyaga is a financial analyst, coach, and trader with more than 8 years in the industry. He has worked for leading companies like ATFX, easyMarkets, and OctaFx. Further, he has published widely in platforms like SeekingAlpha, Investing Cube, Capital.com, and Invezz. In his free time, he likes watching golf and spending time with his wife and child.
