GBP/USD forecast: Risk assets take a tumble on Iran-Israel conflict
The GBP fell along with other risk assets this afternoon on reports Iran was launching a ballistic missile attack against Israel, with Jerusalem later confirming the news. This comes after Israel escalated its military operations against Tehran-backed Hezbollah in southern Lebanon. With risk appetite waning somewhat, the GBP/USD forecast is facing increased uncertainty following three consecutive months of gains. After maintaining stability in recent trading sessions, the cable has seen a slight pullback at the start of the new quarter, partly due to hawkish comments from Federal Reserve Chair Jerome Powell and reduced risk appetite. This week’s key event is the US non-farm payrolls report on Friday, and ahead of it we have had some mixed signals from the jobs market.
Mixed signals from US labour market
US data released today pointed to a mixed picture. While the employment component of the ISM manufacturing PMI fell sharply, the JOLTS Job Openings showed a surprising read to provide a positive-looking leading indicator of overall employment. The latter came in at 8.04 million, much better than 7.64 million expected, while the previous month was revised higher to 7.71 million. But this was offset to some degree by the ISM employment component of the manufacturing sector. This contract by 2.1 points to 43.9 from 46.0 the month before, suggesting the pace of contraction has accelerated. The employment component fell along with new orders and production, while the headline PMI remained in the contractionary territory at 47.2 against expectations of a small bounce.
Looking forward to the rest of the week, the focus will remain on US data, including the monthly jobs report, which could play a pivotal role in the short-term direction of the cable. Although the broader trend for the US dollar has been bearish, the GBP/USD forecast shows signs of possible retracement if the upcoming US data doesn't favour further dollar weakening.
GBP/USD forecast: Technical analysis
From a technical perspective, the GBP/USD’s short-term trend has weakened somewhat after the pair lost its entire gains from the week before. Last week saw the cable near the crucial 1.35-1.40 resistance zone. Historically, this range has acted as a strong ceiling since the 2016 Brexit vote, repeatedly halting upward momentum. Momentum indicators, such as the Relative Strength Index (RSI), were already suggesting that the pair was at overbought levels, so some weakness was due anyway.
At the time of writing, the GBP/USD was testing a key short-term support around 1.3265, which was resistance back in August. If this level breaks down decisively, then the next potential support to watch is at 1.3200, marking the bullish trend line, followed by 1.3142, the high point from July.
In terms of resistance, the now broken support at 1.3312-1.3350 area is the most important hurdle to watch.
In summary, the broader trend of the US dollar is no longer as weak as it was last week, which means the GBP/USD forecast remains highly uncertain, with the near-term direction heavily reliant on incoming US economic data this week and on geopolitics.
EUR/USD technical analysis video:
-- Written by Fawad Razaqzada, Market Analyst
Follow Fawad on Twitter @Trader_F_R
How to trade with City Index
You can trade with City Index by following these four easy steps:
-
Open an account, or log in if you’re already a customer
• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
- Search for the company you want to trade in our award-winning platform
- Choose your position and size, and your stop and limit levels
- Place the trade
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.
ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.
City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.
The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.
The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.
The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.
StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.
This advertisement has not been reviewed by the Monetary Authority of Singapore.
© City Index 2024