GBP/USD Signal 13/10: Head And Shoulders Pattern Forms

(MENAFN- Daily Forex) Bearish view

Sell the GBP/USD pair and set a take-profit at 1.3100. Add a stop-loss at 1.3300. Timeline: 1-2 days.

Bullish view

Buy the GBP/USD pair and set a take-profit at 1.3300. Add a stop-loss at 1.3100.

The GBP/USD pair remained under pressure this week as the US dollar gained momentum amid rising geopolitical risks and traders awaited upcoming inflation data and statements from Federal Reserve officials. It dropped to 1.3207, well below the August high of 1.3677.

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The GBP/USD pair has slumped since late August when it peaked at 1.3677. This sell-off coincided with the ongoing strengthening of the US dollar, with the DXY Index rising to 102.58, its highest level since April last year. It has been in a strong upward trend after bottoming at 95.56 in January.

The pair continued falling as geopolitical risks continued rising. Iran's IRGC continued launching attacks against oil tankers trying to cross the Strait of Hormuz. It striked at least four tankers on Monday. At the same time, the Saudi Arabia-Houthi crisis continued their attacks, which helped to push oil prices higher.

The GBP/USD pair will next react to the upcoming statements by some top Fed officials like Christopher Waller and Susan Collins. Kevin Warsh, the Fed Chair, will deliver a statement on Thursday. This is important because his last statement at the Jackson Hole Symposium had a big impact on the US dollar.

The GBP/USD pair will also react to the US consumer inflation report on Wednesday. Economists see the upcoming report to show that the headline CPI rose 3.6% last month, moving further away from the Federal Reserve's target of 2.0%.

The Office of National Statistics (ONS) will also publish the latest GDP numbers on Thursday. These numbers will provide more hints on the state of the economy, which will have an impact on the Bank of England's decision.

EURUSD Chart by TradingViewGBP/USD Technical Analysis

The weekly chart shows that the GBP/USD pair has slipped in the past few days. It has dropped from the year-to-date high of 1.3865 to the current 1.3204. A closer look at the chart shows that it has formed a head-and-shoulders pattern. It is now sitting along the lower side of this pattern.

The pair has also dropped below the 50-week Exponential Moving Average (EMA), a sign that bears have prevailed. Therefore, it will likely continue falling, potentially to the key support level of 1.3100. This view will be confirmed if it drops below the neckline of 1.3157.

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