GBP/USD Forecast: Pound Near $1.35 as Inflation Risks Mount and Dollar Weakens
The GBP/USD pair rose for a 5th consecutive day on Thursday, trading near $1.3500 in early European session...
Quick overview
- The GBP/USD pair has risen for the fifth consecutive day, trading near $1.3500, supported by the BoE's cautious stance on inflation.
- BoE officials emphasize the need for a restrictive policy due to persistent inflation risks, which bolsters the Pound against the Dollar.
- The US Dollar faces pressure from a government shutdown affecting key data releases and a significant decline in private sector jobs.
- Technically, GBP/USD is at a critical level around $1.3500, with potential for further gains if it breaks above $1.3535.
The GBP/USD pair rose for a 5th consecutive day on Thursday, trading near $1.3500 in early European session. The Pound is supported by the BoE’s cautious stance on inflation, while the US Dollar is under pressure from political and economic headwinds.
On Wednesday, BoE policymaker Catherine Mann said inflation risks are still high despite multiple rate hikes. She said leaving rates unchanged is appropriate until clear signs of easing emerge. Earlier this week, Deputy Governor Clare Lombardelli echoed similar views, saying inflation shocks should not be dismissed as temporary.
This reinforces expectations of a restrictive policy stance from the BoE, giving the Pound an edge over the Dollar.
Dollar Under Pressure from Political and Labor Weakness
The US Dollar is under pressure after the government shutdown halted several key data releases, including the Nonfarm Payrolls (NFP). This creates more uncertainty for traders already worried about slowing growth.
Adding to the pressure, the ADP report showed private employers cut 32,000 jobs in September, the biggest monthly decline since March 2023. August payrolls were revised from 54,000 to 3,000, showing labor market weakness. While wage growth was 4.5% yoy, the job outlook has led to expectations of 2 more rate cuts by year end, weighing on the Dollar.
GBP/USD Technical Outlook: Key Levels to Watch
From a technical perspective, GBP/USD is at a key zone around $1.3500 where a descending trendline from mid-September meets the 100-SMA at $1.3487. Price has bounced strongly from $1.3414 support, forming higher lows that suggest buyer momentum.
Candlestick action shows hesitation, with long wicks at $1.3535 showing sellers defending resistance. But the RSI at 60 suggests bullish momentum isn’t exhausted, leaving room for another push higher. The key battleground is between $1.3535 and $1.3578— a break here would invalidate the downtrend and open up $1.3638. Below that, failure would send the pair back to $1.3460 or $1.3414.
Trade Idea:
- Entry: Close above $1.3535 with conviction
- Stop-Loss: $1.3460 (pivot and 50-SMA)
- Target: $1.3578, $1.3638
This is a neutral risk trade with trendline as the trigger.
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