The GBP/USD currency pair continues to face significant bearish pressure, trending downward towards the 1.3100 level. This decline comes in response to comments made by the Governor of the Bank of England (BoE), which caused a sharp selloff of the Pound Sterling early on Thursday. In its recent movement, the pair reached a three-week low, indicating sustained weakness.
While the current technical analysis suggests oversold conditions, any efforts to initiate a substantial upward correction may be challenging. The US Dollar maintained its strength following a report from Automatic Data Processing (ADP) that indicated a growth in private sector employment by 143,000, which exceeded the forecast of 120,000 jobs. This strength in the US economy pressured the GBP/USD pair further.
Governor Bailey’s remarks hinted at a more active approach to potential rate cuts if there is favorable news regarding inflation, further fueling the downturn for the Pound. Consequently, the EUR/GBP exchange rate saw a rise of over 1% in the same day, reflecting the general weakness of the British currency.
Financial markets are closely watching upcoming US economic indicators, including weekly Initial Jobless Claims and the ISM Services PMI for September. For Jobless Claims, economists anticipate a slight increase to 220,000 claims during the week ending September 28. A reading below 200,000 could likely bolster the US Dollar and place additional downward pressure on GBP/USD . Conversely, if the ISM Services PMI falls unexpectedly below 50, concerns regarding a potential economic slowdown in the US could hinder the Dollar’s strength.
From a technical perspective, the Relative Strength Index (RSI) on the 4-hour chart indicates an oversold state for GBP/USD . Should the currency pair attempt a rebound, resistance levels may emerge at 1.3175 and subsequently at 1.3200, where the 200-period Simple Moving Average resides. On the downside, 1.3100 will serve as the next key support, followed by static levels at 1.3050 and 1.3000.
