GBP/USD Signal 07/09: Lands At A Crucial Support

(MENAFN- Daily Forex) Bullish view

Buy the GBP/USD pair and set a take-profit at 1.3650. Add a stop-loss at 1.3450. Timeline: 1-2 days.

Bearish view

Sell the GBP/USD pair and set a take-profit at 1.3450. Add a stop-loss at 1.3650.

The GBP/USD exchange rate was stuck in a narrow range on Monday as traders digested the latest nonfarm payrolls (NFP) report. It was trading at 1.3515, inside the range it has remained at in the past few days.

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The GBP/USD pair reacted mildly to last week's solid nonfarm payrolls (NFP) report. This report showed that the economy added over 160k jobs last month, suggesting that the labor market was strong. Also, the report also revised the July jobs report upwards from 23k job losses to over 20k jobs created.

These numbers are important because of the impact on the Federal Reserve. In theory, a strong jobs report at a time when inflation is elevated should push the Fed to hike interest rates. Indeed, odds that the Fed will hike interest rates have jumped to over 50% on top prediction platforms.

This view will be confirmed on Friday when the US releases the latest consumer inflation report. In a statement last week, Fed Governor Christopher Waller said that this report will help him determine what to do in the next meeting. If the inflation report comes out hotter than expected, he will vote to hike interest rates.

His statement is important because of his role at the FOMC, where he has been the most dovish official. Indeed, President Donald Trump considered him for the role of the Fed Chair, before ultimately settling on Kevin Warsh.

The GBP/USD pair will react to some numbers from the UK. For example, Lloyds Bank will publish the house price index report later today, providing more color on the sector. Another report will be the retail sales monitor on Tuesday, followed by the GDP data on Friday this week.

EURUSD Chart by TradingViewGBP/USD Technical Analysis

The daily chart shows that the GBP/USD pair has done well in the past few months. It has formed a series of lower highs and higher highs, and is now at the lower side of the channel.

The pair is also supported by the 50-day moving average. In this case, the pair has two potential outcomes. First, it may lose the 50 EMA and the lower side of the channel support, which would lead to a retreat towards 1.3400. On the other hand, it may start rebounding as investors buy the dip. In such situation, it will rebound and retest the upper side of the channel at 1.3700.

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