• Demand for the dollar increased last week due to geopolitical tensions.

• The US economy added 254,000 jobs, well above estimates of 140,000.

• Markets are pricing a 95% chance of a 25-bps November Fed rate cut.

The GBP/USD forecast shows a solid downtrend after Friday’s upbeat US jobs report boosted the dollar. Meanwhile, the pound remained fragile after mixed rate cut signals from Bank of England policymakers.

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Demand for the dollar increased last week due to geopolitical tensions and better-than-expected US economic data. Notably, the conflict in the Middle East escalated last week after Iran attacked Israel, leading to fears of retaliation.

Meanwhile, in the US, data last week showed a resilient labor market and strong business activity in the services sector. The major event was the nonfarm payrolls, which beat estimates. The US economy added 254,000 jobs, well above estimates of 140,000.

At the same time, the unemployment rate eased from 4.2% to 4.1%. Economists had expected it to hold steady at 4.2%. The US Central Bank has kept a close eye on the labor market and cut rates by 50-bps to keep it from deteriorating. Moreover, market participants were pricing another significant rate cut in November.

However, this outlook changed on Friday, with markets now pricing a 95% chance of a 25-bps cut. The prospects of a gradual Fed easing cycle will support the dollar in the near term.

Meanwhile, the pound collapsed last week after BoE governor Bailey said the central bank might cut rates aggressively if inflation eases. On the other hand, BoE chief economist Huw Pill advocated for gradual rate cuts.

GBP/USD key events today

Investors do not expect any key economic reports today. Therefore, the pair might extend Friday’s moves.

GBP/USD technical forecast: Bears pause for breather near 1.3051

On the technical side, the GBP/USD price is approaching the 1.3051 support level after a sharp bearish move. The previous bullish trend paused near the 1.3400 resistance level. Here, bears took charge by breaking below the 30-SMA. The new bearish move was strong and impulsive, breaking below solid support levels.

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However, after the sharp decline, the RSI has made a bullish divergence with the price. This is a sign that bears are exhausted. Therefore, the price might rebound to retest the 30-SMA or the 1.3251 resistance level. Nevertheless, since the bearish bias remains strong, the price might eventually breach the 1.3051 support.

https://www.forexcrunch.com/blog/2024/10/07/gbp-usd-forecast-us-jobs-report-sparks-dollar-rally/