Current trend

The GBP/USD pair is trading within the long-term uptrend, but this week the quotes have adjusted down to the central line of Bollinger Bands around 1.3235.

On Monday, the head of the US Federal Reserve, Jerome Powell, announced a more cautious than expected reduction in interest rates by the end of the year, totaling 50 basis points, rather than 75 basis points, and yesterday assets alternative to the dollar experienced new sales, as the danger of a full-scale military conflict between Israel and Iran forced investors to turn to the US dollar as to the safe haven asset. In addition, the September UK Manufacturing PMI fell from 52.5 points to 51.5 points due to the fact that business representatives are concerned about tax increases announced by the new government, which may negatively affect profits.

However, the current correction is unlikely to lead to a change in the uptrend due to the different approaches of the US Federal Reserve and the Bank of England (BoE) to monetary policy. So, the market still expects a significant reduction in the cost of borrowing from the United States, despite Jerome Powell's recent comments, if unemployment in the country continues to rise. Investors, on the contrary, expect cautious actions from the BoE, implying only one reduction in the key rate by the end of this year.

Under these conditions, the resumption of growth of the GBP/USD pair in the medium term seems to be a more likely scenario.

Support and resistance

Technically, the price is at the central line of Bollinger Bands and, after the breakdown of it and the level of 1.3183 (Murrey level [4/8]), the decline may continue towards the targets of 1.3061 (Murrey level [3/8]) and 1.2890 (61.8% Fibonacci retracement). The key for the "bulls" is the level of 1.3427 (Murrey level [6/8]), the breakout of which will ensure the strengthening of upward dynamics up to the level of 1.3671 (Murrey level [8/8]).

Technical indicators do not give a clear signal: Bollinger Bands are directed up, MACD is decreasing, but remains in the positive zone, and Stochastic is pointing down.

Resistance levels: 1.3427, 1.3671.

Support levels: 1.3183, 1.3061, 1.2890.

Trading tips

Long positions can be opened above 1.3427 with a target of 1.3671 and a stop-loss of 1.3300. Implementation period: 5–7 days.

Short positions should be opened below the level of 1.3183 with targets of 1.3061, 1.2890 and a stop-loss around 1.3265.