GBP/USD Signal Today – 16/10: Sterling at Risk (Chart)

Bearish View

  • Sell the GBP/USD pair and set a take-profit at 1.2890.
  • Add a stop-loss at 1.3150.
  • Timeline: 1-2 days.

Bullish View

  • Set a buy-stop at 1.3140 and a take-profit at 1.3250.
  • Add a stop-loss at 1.3050.

GBP/USD Signal Today - 16/10: Sterling at Risk (Chart)

The GBP/USD exchange rate remained on edge ahead of the upcoming UK consumer inflation report. It was trading at 1.3063 on Wednesday morning, down by over 2.73% from its highest level this month.

UK Inflation Report

The GBP/USD pair moved sideways after the Office of National Statistics (ONS) released the latest UK jobs numbers.

These numbers revealed that the unemployment rate improved to 4.0% in August, lower than the median estimate of 4.1%.

Also, the average earnings index with bonuses rose to 3.8% in August from 4.1% in the previous month.

The next key GBP/USD news will be the UK inflation data, which will provide more information on whether the actions by the Bank of England (BoE) are working.

Analysts expect the report to show that the headline CPI dropped from 0.3% to 0.2% on a MoM basis. They also see the core CPI, which excludes the volatile food and energy products, to drop from 0.4% to 0.3%.

The two numbers are expected to drop to 1.9% and 3.4%, respectively. If these estimates are correct, they will raise the probability that the Bank of England (BoE) will restart cutting interest rates in the next meeting since it has achieved its inflation target.

The GBP/USD pair also reacted to the rising hopes that the Labor administration will start hiking taxes as Chancellor Rachel Reeves works to fill a £40 billion gap. She will share her plans when she delivers her budget proposals on October 30th.

Analysts caution that hiking taxes would make the UK less competitive, especially after the Brexit vote.

There will be no major US economic data on Wednesday. As such, traders will continue focusing on Thursday’s retail sales and jobless claims numbers.

GBP/USD Technical Analysis

The GBP/USD exchange pair has been in a strong downward trend in the past two weeks as the US dollar index staged a strong comeback.

It has slipped below the important support level at 1.3142, its highest level on July 14. The pair has also moved below the 50-day Exponential Moving Average (EMA), while the MACD and the Relative Strength Index (RSI) have pointed downwards.

It has formed a rising broadening wedge pattern, a popular reversal sign. Therefore, the GBP/USD pair will likely have a bearish breakout as sellers target the key support at 1.2895, the 38.2% Fibonacci Retracement point.

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