Pound Sterling Bearish Trend to Contin

On Monday, Chancellor Kwarteng said that he will rush forward his debt-cutting plan to October 31st. The plan will show how he plans to fill a fiscal hole worth more than 40 billion pounds.

Advertisement

Bearish view

  • Sell the GBP/USD and add a take-profit at 1.0700.
  • Add a stop-loss at 1.1200.
  • Timeline: 1-2 days.

Bullish view

  • Set a buy-stop at 1.1125 and a take-profit at 1.1250.
  • Add a stop-loss at 1.1050.

The GBP/USD price came under pressure in the overnight session as the Bank of England (BoE) scrambled to soothe the market. It dropped to a low of 1.1066, which was the lowest level since September 30th of this year. It has dropped by more than 3% from its highest level this month.

BoE and government attempts to soothe market

The UK economy has been on edge since Chancellor Kwasi Kwarteng delivered his mini budget that had over 45 billion in tax cuts. This announcement led to a major plunge of UK stocks and the British pound. Sterling fell to the lowest level on record in September.

The government attempted to reassure the market by getting rid of a tax cut for the wealthy. While the small change boosted pound sterling, fears have returned about the British economy. On Monday, Chancellor Kwarteng said that he will rush forward his debt-cutting plan to October 31st. The plan will show how he plans to fill a fiscal hole worth more than 40 billion pounds.

Meanwhile, the Bank of England (BoE) also struggled to calm the market as gilts jumped to the highest level in years. The bank announced a new short-term funding facility to avoid a cliff edge. 30-year gilts surged by 0.30% to 4.68%. Analysts said that the new measures by the bank were insufficient and that they did not recognize the long-term challenges for the UK economy.

The next important catalyst for the GBP/USD price will be the upcoming UK jobs numbers. Analysts polled by Reuters show that the unemployment rate remained unchanged at 3.6% in August. They also expect the average earnings with bonuses rose from 5.5% to 5.9%. These numbers will signal that the labor market is substantially strong.

GBP/USD forecast

The four-hour chart shows that the GBP/USD price has been in a strong bearish trend in the past few days. It has move below the important resistance level at 1.1358, which was the lowest level on June 16. The pair has dropped below the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved below the neutral point.

It has dropped below the standard pivot point and is slightly above the first support. Therefore, the pair will likely continue falling as sellers target the next key support at 1.0700. The stop-loss of this trade is at 1.1200.

GBP/USD

Ready to trade our free Forex signals? We’ve shortlisted the best Forex trading brokers in the industry for you.


Source link

Post Author: admin

0 0 votes
Article Rating
Subscribe
Notify of
guest
0 Comments
Inline Feedbacks
View all comments