FX.co ★ GBP/USD

GBP/USD declines after gaining modest ground in the previous session and trades near 1.3204 in early trading on Monday morning in Asian session. The currency pair is under pressure as USD strengthens ahead of the upcoming release of the US ISM Services Purchasing Managers' Index. Nevertheless, investors have lowered their forecasts for a Fed rate hike due to weak US employment figures released recently. The odds of no change in the benchmark rate at the Fed's October policy meeting are now 77.9%, up from 74% before the payroll numbers. The shift in market sentiment is due to the disappointing labor market performance, with US NFP rising by just 29,000 in September. The figure is well below consensus expectations of 90,000 and marks a drastic slowdown from a revised increase of 133,000 last month. In addition, the US unemployment rate has climbed to 4.2% despite an expansion of the labor force participation rate to 61.8%. In the UK, market participants have discounted rate hikes of about 30 basis points by the BoE for the remainder of this year, as well as 90 basis points over 2022 through 2027. BoE officials such as Governor Andrew Bailey have made it clear that the central bank is becoming more ready to hike interest rates to counter the inflation threat caused by high energy costs. Analysts at MUFG emphasize an improvement in the UK growth backdrop, noting that BoE staff have raised their forecasts for the current quarter. Consistent with the above, MUFG/BTMU say that they have "upgraded their Q3 growth forecast to 0.4% from the 0.1% growth forecast made by them in July." This suggests growth may support the Pound even as it trades at YTD lows against the USD. On the daily chart, GBP/USD is trading at 1.3204 with a bearish near-term tone, as the spot level is trading below the nine-period EMAs. Below these key EMA levels, any potential rally should be contained there, and with the 14-day RSI at 35, the pair should remain under downward pressure rather than being oversold. On the upside, the nearest resistance is the nine-period EMA around 1.3259, with the second level at the 50-period EMA around 1.3399, reinforcing the bearish pattern. Since the technical indicators show no support, any drop should draw attention to new horizontal support zones from the previous lows. At the same time, a close above 1.3259 would be the first indication that selling pressure is easing.