GBP/USD Analysis Today 08/10: Limited Rebound (Chart)
Date
10/8/2024 2:47:49 PM
(MENAFN- Daily Forex)
According to recent trades, the GBP/USD exchange rate has declined by 2.0% last week and still appears strong, but a limited rebound is possible in the coming days. Recently, Sterling losses reached the support level of 1.3060, the lowest in three weeks. Furthermore, the decline in the exchange rate comes amid a reassessment of how quickly the federal Reserve can cut US interest rates in the future, given the strengthening of the US economy. Commenting on the performance of the Forex market, Francesco Pesole, a forex analyst at ING Bank, said: "The foreign exchange market has undergone a difficult readjustment as the idea of an easy Federal Reserve has now evaporated.
The most important data of the month came on Friday in the form of the US Non-Farm Payrolls report, which showed an unexpected improvement in the employment situation in the United States. 254,000 jobs were created in September, beating expectations of a reading of 147,000. Any hopes of a 50bp rate cut by the US before the end of the year have been dealt a major blow by this data, with investors wondering whether they will succeed in cutting rates by 25bps twice. In fact, a 25bp rate cut by the US is not out of the realm of reality.
Therefore, there has been a significant adjustment in expectations, and with a weekly decline of 2.0% in the rearview mirror, it is possible to buy some dips in the GBP/USD pair. According to reliable trading platforms, the GBP/USD pair has now retreated to its 50-day moving average at 1.3078, which provided support on Friday. Concurrently, this forms a near-term support level to watch this week and some pullback from the strong selling around these levels could occur.
Top Forex Brokers1 Get Started 74% of retail CFD accounts lose money Technical forecasts for the GBP/USD pair today:
Technically, I would caution that any confirmed break below the 50-day moving average at any point in the coming days could represent a more determined breakdown underway that could risk turning GBP/USD from a medium-term uptrend to a downtrend. Downside risks also come in the form of ongoing geopolitical concerns cantered around the Middle East. Overall, the GBP/USD rally will be contained below the 2024 highs (1.34) and it will take signs of renewed slowdown in the US economy to drive the next phase of GBP/USD's rally.
We will not get any chance of the data needed to drive this narrative until later. According to the economic calendar, the US inflation report on Thursday is the highlight of the week, as it will determine how market sentiment evolves in line with expectations of interest rate cuts by the Federal Reserve. Therefore, a reading below expectations would boost hopes that the Federal Reserve will cut interest rates twice more in 2024, which could strengthen the pound sterling against the euro and the US dollar.
For now, the market is looking for a reading of 2.3% on an annual basis and 0.1% monthly. Ultimately, anything higher could push back expectations of interest rate cuts further and could cause the pound sterling to suffer until the end of the week.
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