Attempts at an Upward Correction

Since the middle of last week’s trading, the price of the GBP/USD currency pair has been trying to rebound higher with gains that reached the resistance level of 1.2261. It is recovering from its broader downward path that pushed it towards the support level of 1.2037, its lowest in seven months. It closed the week’s trading stable around the level of 1.2234, and a trading week is awaited. Important and exciting title: US inflation numbers and the content of the minutes of the last meeting of the US Federal Reserve.

Last week, the unexpected wave of US hiring last month raised hopes that the US economy would prove its resilience again, even with a host of threats awaiting it. Businesses across the U.S. economy ramped up hiring in September, defying rising interest rates, financial market turmoil, the persistent threat of a government shutdown, and an uncertain outlook for adding the most jobs in any month since January.

Overall, the hiring spree has confounded expectations of a slowdown and added another layer of complexity to the Fed’s relentless efforts to beat inflation without causing a recession. According to the official announcement, the US jobs added in September, which amounted to 336 thousand jobs, exceeded 227 thousand jobs in August and raised the average gains over the past three months to a strong 266 thousand jobs. The country’s unemployment rate remained unchanged at 3.8%, which is not much more than its lowest level in half a century.

The US government report last Friday raised hopes for a very difficult “soft landing”, through which the US Federal Reserve would be able to curb high inflation through a series of US interest rate hikes without derailing the economy. But the healthy pace of hiring also highlights the confusing nature of the U.S. economy as it navigates the unknown post-pandemic era. A strong labor market suggests that growth may be too healthy to allow inflation to continue to decline and that the Federal Reserve may have to raise US interest rates further.

Speaking after the release of September employment data, US President Joe Biden stressed that strong job growth was a result of his policies, a message he repeated in his speeches ahead of next year’s elections. However, polls show that most adults still have a negative view of the economy, with Biden’s agenda having no significant impact on public sentiment yet. The US President attributed general doubts about the economy to the nature of news media coverage, which he said prioritized negativity. Biden said: “I think the American people are very smart and know what their interests are.” “I think they know they are in a better financial position than they were before.”

The US Federal Reserve has raised its benchmark short-term interest rate 11 times since last year to about 5.4%, the highest rate in 22 years – the fastest pace of US interest rate hikes in four decades. These increases are intended to slow borrowing and spending by businesses and consumers, thus cooling growth. When employers added just 105,000 jobs in June, economists expected more modest gains. Instead, employment rebounded strongly.

• Despite recent attempts to rebound higher, the broader general trend of the GBP/USD currency pair is still bearish.
• It still needs strength factors whose impact the bulls will control the trend.
• They must first move towards the resistance levels 1.2335 and 1.2450 to break the general downward trend according to the performance on the daily chart below.

On the other hand, over the same time period, the GBP/USD break of the support level of 1.2150 will support the bears to think about moving towards the psychological support level of 1.2000 again. The technical indicators are still leaning downwards. I expect a quiet trading session today in light of an American holiday and the calendar being devoid of important British economic data.

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