Driven by the continued strengthening of the US dollar, the GBP/USD exchange rate fell to its lowest level in several months after forming a double-top pattern. The exchange rate once dropped to a low of 1.3100, significantly below the high recorded in September.
The core reason for this decline in the GBP/USD currency pair is the persistent strength of the US dollar. After bottoming out in September, the dollar began an upward trajectory, and its rally has continued even after the Federal Reserve announced consecutive interest rate cuts at its second meeting.
Some Federal Reserve officials have signaled that they remain concerned about inflation in the United States. In a statement on Monday (November 3), Austan Goolsbee warned that inflation has remained above the Federal Reserve’s 2.0% target for too long, hinting that he would not support another interest rate cut in December.
In the coming days, the GBP/USD currency pair will face several key influencing factors. Among them, the most noteworthy is the upcoming release of the US ADP private non-farm employment data, which will provide a reference for the Federal Reserve’s interest rate decision in December.
Additionally, a ruling by the UK Supreme Court concerning Trump’s tariff policy will also impact the movement of this currency pair. The Supreme Court will hold its first oral argument on the case on Wednesday (November 5). While the final verdict will not be announced for several months, the judges’ questions during the hearing may offer clues about the direction of the ruling.
Another significant development affecting the GBP/USD exchange rate is the Bank of England’s (BoE) interest rate decision, scheduled to be announced on Thursday (November 6).
The double-top pattern in GBP/USD suggests further downside potential.
(GBP/USD Daily Chart Source: YiHuiTong)
The daily chart shows that the GBP/USD currency pair has been in a strong downtrend over the past few months. The pair has fallen from the September high of 1.3725 to the current level of 1.3140.
GBP/USD formed a double-top pattern at 1.3725, and the exchange rate is currently at the neckline of this pattern — a level which also corresponds to the lowest point in August this year and coincides with the 38.2% Fibonacci retracement level.
The target price for the double-top pattern is calculated as follows: first, measure the distance from the top of the pattern (1.3725) to the neckline; in this case, the range is 4.23%; then extend the same range downward from the neckline, yielding a target price of 1.2580.
In addition, the GBP/USD exchange rate has broken below both the 50-day and 200-day moving averages and is also trading below the Ichimoku Cloud indicator, further supporting a bearish outlook.
Bearish View
Sell the GBP/USD currency pair, with a take-profit level set at 1.3000. Set the stop-loss level at 1.3250. Time horizon: 1-2 days.
Bullish Viewpoint
Buy the GBP/USD currency pair, with a take-profit level set at 1.3250. Set the stop-loss level at 1.3000.
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