- Iran attacked Israel with missiles, intensifying the conflict in the Middle East.
- U.S. job creation data revealed better-than-expected labor demand.
- Data from the UK revealed a drop in factory activity that weighed on the pound.
The GBP/USD forecast points south as the US dollar gets its shine amid escalating Middle East tensions. At the same time, the pound fell after weaker-than-expected UK manufacturing data raised the likelihood of a BoE rate cut.
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Iran attacked Israel with missiles on Tuesday, intensifying the conflict in the Middle East. Israel has been fighting Hezbollah in Lebanon for weeks. Market participants worried about a wider war that could affect the global economy. As a result, risk appetite declined and the dollar rose on safe-haven demand.
Moreover, US job creation data revealed better-than-expected labor demand. Notably, the number of job vacancies rose to 8.04 million, beating forecasts of 7.64 million. A resilient labor market will allow the Fed to achieve a soft landing, with inflation reaching 2% and growth holding steady.
More support for the dollar came from Powell’s speech on Monday. The president of the Fed said that the central bank will probably cut rates twice more this year for a total of 50 basis points. He therefore dismissed expectations for a massive rate cut in November.
Meanwhile, in the UK, data revealed a drop in factory activity that weighed on the pound. Manufacturing PMI fell to 51.5 in September, but remained in expansion territory. Meanwhile, traders continued to speculate on the upcoming October 30 budget. The new Chancellor of the Exchequer will announce new tax measures and spending plans that could affect the UK economy and the outlook for monetary policy. Consequently, this can cause a lot of volatility in the GBP/USD pair.
GBP/USD key events today
- US ADP Employment change excluding agriculture
GBP/USD Technical Forecast: Resistance at 1.3400 triggers a trend reversal
On the technical side, the GBP/USD price is falling sharply after breaking below the 30-SMA and its bullish channel. The previous bullish trend failed to continue above the resistance level at 1.3400, where the bears took control. Furthermore, the RSI has made a strong bearish divergence, indicating a weakening of the bullish momentum.
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The price recently broke the 1.3301 support and paused to retest the level. It is trading well below the 30-SMA and the RSI is closer to the oversold region. Accordingly, the bearish bias is strong and could lead to a retest of the 1.3200 support level.
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