• Iran attacked Israel with missiles, increasing the conflict in the Middle East.

• Data from the US on job openings revealed better-than-expected demand for labor.

• UK data revealed a decline in factory activity that weighed on the pound.

The GBP/USD forecast points south as the US dollar finds its shine amid escalating Middle East tensions. At the same time, the pound fell after weaker-than-expected UK manufacturing data raised the likelihood of a BoE rate cut.

On Tuesday, Iran attacked Israel with missiles, increasing the conflict in the Middle East. For weeks, Israel has fought Hezbollah in Lebanon. Market participants worried about a wider war that could impact the global economy. As a result, risk appetite fell, and the dollar rose on safe-haven demand.

Furthermore, data from the US on job openings revealed better than expected demand for labor. Notably, vacancies rose to 8.04 million, beating forecasts of 7.64 million. A resilient labor market will allow the Fed to achieve a soft landing, with inflation reaching 2% and growth remaining steady.

More support for the dollar came from Powell’s speech on Monday. The Fed Chair said the central bank would likely cut twice more this year by a total of 50-bps. Therefore, he pushed back expectations for a massive November rate cut.

Meanwhile, in the UK, data revealed a decline in factory activity that weighed on the pound. The manufacturing PMI fell to 51.5 in September but stayed in expansion territory. Meanwhile, traders continued to speculate on the upcoming October 30 budget. The new finance minister will announce new tax measures and spending plans that might impact the UK economy and the outlook for monetary policy. Consequently, it might cause a lot of volatility in the GBP/USD pair.

GBP/USD key events today

• US ADP Non-Farm Employment Change

GBP/USD technical forecast: 1.3400 resistance triggers trend reversal

On the technical side, the GBP/USD price is steeply declining after breaking below the 30-SMA and its bullish channel. The previous bullish trend failed to continue beyond the 1.3400 resistance level, where bears took control. Moreover, the RSI made a strong bearish divergence, indicating fading bullish momentum.

The price recently breached the 1.3301 support and has paused to retest the level. It trades well below the 30-SMA, and the RSI is nearer the oversold region. Consequently, the bearish bias is strong and could lead to a retest of the 1.3200 support level.

https://www.forexcrunch.com/blog/2024/10/02/gbp-usd-forecast-dollar-gains-after-irans-attack/