The GBPUSD pair will likely continue rising as buyers target the next resistance level at 1.1725.
- Buy the GBP/USD pair and set a take-profit at 1.1725.
- Add a stop-loss at 1.1350.
- Timeline: 1-2 days.
- Set a sell-stop at 1.1350 and a take-profit at 1.1250.
- Add a stop-loss at 1.1450.
The GBP/USD price continued its bullish recovery as concerns about the UK economy eased. The pair surged to a high of 1.4500, which was the highest level since September 19th. It has risen by more than 10% from its lowest level last week.
Will the Fed pivot?
The GBP/USD pair continued rising as the US dollar index continued retreating. The index, which measures the performance of the greenback against a basket of currencies, dropped to $110, which was lower than last month’s high of almost $115.
The US dollar has dropped against most developed and emerging market currencies like the Russian ruble and South African rand. This decline also coincided with the sharp retreat of the VIX index and the rally in global equities. The Dow Jones rose by more than 700 points after it added 800 points on Monday. This was the biggest two-day increase since 2020. At the same time, bond yields continued to drop.
This performance is mostly because some analysts believe that the Federal Reserve will start to pivot after delivering more than 300 basis point rate increases. Still, the bank has hinted that it will deliver another 0.75% rate hike in November and a 0.50% increase in December.
Hopes of a pivot rose after the US published weak job vacancies data. According to the Bureau of Labor Statistics (BLS), American employers slashed more than 1 million jobs in August in a sign that the market was softening. Job vacancies dropped from more than 11 million in July to 10.05 million in August. ADP will publish its estimate of private payrolls for September.
The GBP/USD price did well as investors remained optimistic about the UK economy after the new government decided to remove a major tax break for the wealthy. It is unclear whether the government will tweak the remaining tax breaks.
The four-hour chart shows that the GBP/USD pair has been in a strong bullish trend in the past few days. In this period, the pair managed to move above the important resistance level at 1.1420, which was the lowest level on September 7.
Therefore, the pair will likely continue rising as buyers target the next resistance level at 1.1725, which was the highest level on September 13.