GBP/USD Price Analysis – Sep 09, 2024
Daily Price Outlook
The Pound Sterling (GBP) dropped below 1.3100 against the US Dollar on Monday, marking a fresh two-week low.
The GBP/USD pair faced selling pressure as the US Dollar Index (DXY) rose to 101.40, driven by diminishing expectations for aggressive rate cuts from the Federal Reserve (Fed).
The recent Nonfarm Payrolls (NFP) report showed mixed signals for the labor market, which tempered market hopes for a 50-basis-point rate cut in September.
According to the CME FedWatch Tool, the probability of such a cut has fallen to 27%, down from 41% before the release of August’s labor data.
While the report showed slower job growth, the Unemployment Rate ticked lower, and wage growth accelerated at 0.4%—strong enough to keep recession fears at bay.
This has bolstered the US Dollar, as the Fed is now less likely to ease aggressively, putting pressure on the Pound.
UK Employment Data in Focus
The focus for GBP/USD traders is now shifting to the UK labor market data set to be released on Tuesday. The report will provide critical insights into the Bank of England’s (BoE) future interest rate decisions.
According to estimates, the Unemployment Rate is expected to fall slightly to 4.1% from 4.2%, while Average Earnings Including Bonuses are forecast to soften to 4.1%, down from 4.5%.
The labor data could influence market speculation about the BoE’s next move, particularly if wage growth continues to decelerate.
Slower wage growth would ease inflationary pressures, especially in the services sector, potentially encouraging the BoE to consider further rate cuts to support the economy.
Additionally, a report from KPMG and the Recruitment and Employment Confederation (REC) showed that permanent job placements in the UK dropped at their fastest pace in five months, signaling a cooling labor market.
Pay growth for new hires also slowed, hitting a five-month low—one of the weakest readings since early 2021.
What to Expect from CPI Data
Looking ahead, the US Consumer Price Index (CPI) data for August, due on Wednesday, is expected to provide fresh cues on the Fed’s rate outlook.
The CPI is forecast to show 0.2% growth for both headline and core inflation, while annual headline inflation is expected to slow to 2.6%, down from 2.9% in July.
This inflation data will be crucial in shaping market expectations for Fed policy in the coming months. If inflation continues to cool, it could support the case for more moderate rate cuts, limiting further upside for the US Dollar.
GBP/USD - Technical Analysis
The GBP/USD pair is currently trading at $1.31052, inching up by a modest 0.01%. However, the technical landscape suggests a bearish bias in the short term.
Immediate price action remains capped below the pivot point at $1.3142, with resistance stacking higher at $1.3188, $1.3227, and $1.3266.
As market sentiment weakens, the pair is struggling to gain momentum, particularly with a Relative Strength Index (RSI) of 39, indicating oversold conditions that could signal a potential continuation of downward movement.
The 50-day Exponential Moving Average (EMA) at $1.3154 reinforces the notion that the pair is facing resistance from broader market pressures.
A failure to close above this level in recent sessions has further solidified a bearish outlook, leaving the door open for potential tests of lower support levels.
On the downside, immediate support stands at $1.3089, with further levels at $1.3052 and $1.3011 providing a stronger safety net for potential declines.
Should the pair breach the immediate support at $1.3089, a swift move toward $1.3052 is highly probable, with a potential extended drop toward $1.3011 if bearish momentum intensifies.
Given the technical setup, the recommended strategy is to consider short positions below the pivot point at $1.31413. The target for taking profit is at $1.30520, with a stop-loss placed above immediate resistance at $1.31878, to mitigate potential upside risk.
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