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MENAFN- Daily Forex)
After five consecutive trading sessions during which the GBP/USD pair was subject to selling starting from the resistance level of 1.3265, its highest level in two years. Accordingly, during which we strongly recommended selling the GBP/USD, the pair collapsed to the support level of 1.3087 at the beginning of trading in the important US jobs week. From this level, the sterling attempted to stop its losses and rebound upwards, but its gains did not exceed the 1.3175 level, and it is currently stabilizing around the 1.3145 level at the time of writing.
Is it time to buy the US dollar?
After a weak August, the US dollar has come back to life strongly and is pushing the price of the pound sterling down again. One currency specialist believes that the GBP/USD pair may fall below 1.30. Technical analysis from Horizon Currency, the international payment solutions provider, shows that the GBP/USD exchange rate could be set for further weakness in the near term as there is still some room left for current selling in the market. This leaves those looking to buy dollars off recent highs: GBP/USD peaked at a 29-month high of 1.3266 in August, and a pullback takes us back to 1.31, with 1.29 a potential key support level that could be tested in September. Moreover, USD buyers should remember that these are strong levels on a relative basis: sterling's purchasing power is still stronger than it was just two weeks ago.“Clients are nervous, wondering if the good run is over, and wondering if it's a good time to send money,” says Louisa Ballard, director at Horizon Currency. Added,“We tell them that the exchange rate is still higher than it has been for most of the past two years. Also,“So, I think that fixing the current exchange rate at 50% of your exposure will ease some of the anxiety for those who are about to make a trade.”
According to Forex Markets, the September sell-off in GBP/USD gained momentum on Tuesday after economic data was released suggesting that the US is entering a recession. The market saw a classic“risk-off” move after a survey of US manufacturers showed that the sector is slowing and that price pressures are rising again, creating a potential macroeconomic scenario of stagflation.
Financial markets had rallied strongly in the second half of August on hopes that the Federal Reserve would prevent any slowdown by cutting US interest rates decisively. Obviously, the risk to this view is that the Fed's rate hike is less certain if inflation starts to rise again.
Top Forex Brokers1 Get Started 74% of retail CFD accounts lose money Technical forecasts for the GBP/USD pair today:
In the short term, GBP/USD could fall further, but ultimately remains in a technical uptrend that could last for several months. According to the technical analysis, a short-term pause cannot be ruled out, but the graphical level near 1.2900 should mitigate the decline. Technically, defending the support level of 1.2900 could mean the continuation of the upward movement. Furthermore, the next potential targets are expected near 1.3320/1.3360 and 1.3580 respectively.
Today, the GBP/USD pair will be affected by the announcement of the weekly US unemployment claims rate, along with the US non-farm payrolls number from this ADP survey, along with the ISM service sector index.
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