Would the British Pound stop, just STOP swinging against the US Dollar. Currently, the GBP/USD pair is near an important psychological support level at 1.3140. This significant price point represents the 61.8% retracement area of growth from the lows recorded at the beginning of the year to the peaks observed in early July. It has been a clear short-term bearish direction for GBP/USD, as the move has held strong over the last week.
On 17 September, GBP/USD hit a local top that was almost perfectly timed with the Fed’s first cut in key rate. After this date, dollar buyers stepped up their influx into the GBP/USD market, adding to the pair’s downturn. Additionally, GBP/USD has set up a double top formation. The recent highs above $10 were achieved in late June and mid-September, suggesting potential overhead resistance at these highs.
At time of writing, GBP/USD remains firmly below the key 200-day moving average of 1.3180. Market analysts consider a consolidation below this level a precursor to a likely trend reversal. They further note that other important thresholds can act as other, complementary confirming signals. GBP/USD had dropped further last week but was at least showing signs of momentum reversal by Friday – which initially continued to hold its ground on Monday.
According to a recent labor market statistical bulletin from the UK, there was a large spike in new applications for unemployment benefit. Just in September, applications surged by 25.8K – more than doubling the total to 50.8K. The jump has raised new fears that the economy’s labor market underpinnings are becoming tenuous. Indeed, the unemployment rate for the three months ending in August jumped to 4.8%. That’s the highest unemployment rate since May 2021 – in a development that economists had predicted would not happen, though it was always likely.
With unemployment claims rising and the unemployment rate rising as well, it’s adding additional pressure on the Pound. It is now heading towards important support levels against the Dollar. The next 4–5 days will be the deciding factor. They will decide whether GBP/USD can find a floor, or whether it continues its descent.