The biggest trigger for the GBP/USD pair will be the upcoming rate decision by the BOE.
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- Buy the GBP/USD pair and set Take Profit at 1.2825.
- Add a stop loss at 1.2650.
- Schedule: 1-2 days.
- Set the sell stop at 1.2685 and the take profit at 1.2600.
- Add a stop loss at 1.2750.
The GBP/USD price continued its decline as the market reacted to the US credit rating downgrade and the Bank of England’s (BoE) upcoming decision. The pair fell to a low of 1.2682, its lowest since July 6th.
The US dollar index continued its rebound on Wednesday as the market reflected Fitch’s credit downgrade. In his lengthy statement, Fitch warned that the United States faces greater risks from a surge in public debt. The country’s debt has soared to more than $32 trillion and the deficit is expected to continue widening in the coming years.
The GBP/USD pair also fell after the ADP released its latest jobs report. The private sector added 324,000 jobs in July, above the median forecast of 189,000, according to the report. The ADP also lowered its employment forecast for June to 455,000.
These figures show that the US job market remains tight, with many sectors reporting severe labor shortages. The U.S. Bureau of Labor Statistics (BLS) will release the latest initial and continuing jobless claims on Thursday. Official NFP data will also be released on Friday.
The biggest trigger for the GBP/USD pair will be the upcoming rate decision by the BOE. Most economists expect the central bank to raise rates by 0.25% to 5.25%, the highest level in years.
Some analysts believe this will be the last rate hike of the year as the economy slows. Recent data showed that retail sales and manufacturing activity in the country have slowed in the past few months. Further hikes are therefore likely to lead to a hard landing and prolonged stagflation.
The GBP/USD pair is in a strong downtrend after peaking at 1.3147 on July 14th. It has broken below the key support of 1.2846, the June 16th high. The pair also flipped the support at 1.2762 to resistance.
It has broken below the Ichimoku cloud and the 50-period moving average. At the same time, the Money Flow Index (MFI) is approaching the oversold level of 20. Therefore, the currency pair is likely to rebound with relief on Thursday as investors buy dips ahead of or after the Bank of England’s decision. If so, the next important level to watch will be 1.2800.
