GBP/USD Forecast: Boris and technicals are no match for King Dollar, plenty of room to fall

"People have been worrying about inflation for a very long time. I’m looking at robust economic growth" – UK Prime Minister Boris Johnson's positive twist on Britain's current woes has failed to boost sterling. British gas prices have soared by 40% to record highs, squeezing UK consumers and sending the pound tumbling.

Johnson is set to give his keynote speech at the Conservative Party conference later in the day and paint a rosy picture of post-Brexit Britain. He wants the country to get used to living without significant EU migration in the long run. In the short run, that means managing without much-needed lorry drivers to bring fuel to petrol stations. That crisis is still going on.

GBP/USD has also been falling due to the strength of the US dollar. Bond yields have resumed their gains, with returns on 10-year Treasuries hitting 1.57%, the highest since June. The upcoming decision by the Federal Reserve to taper its bond-buying scheme is the underlying driver – and recent indications of rising inflation add fuel to the fire.

The ISM Services Purchasing Managers' Index for September beat estimates with 61.9 points and the Price Paid component advanced as well. On Wednesday, investors will be watching the ADP labor figures, with expectations standing at 425,000 for September, higher than 374,000 in August.

See US ADP Employment Change September Preview: Yes, its all about the Fed

That could also give another boost to the dollar – especially as last month's ADP figures were better correlated with the official Nonfarm Payrolls report. 

Overall, cable has significant room to fall.

GBP/USD Technical Analysis

Pound/dollar continues maintaining upside momentum on the four-hour chart, a bullish sign. However, the pair has slipped back below the 50 Simple Moving Average (SMA) and remains below the 100 and 200 SMAs. while the Relative Strength Index (RSI) is outside oversold conditions, thus allowing for more falls.

Support awaits at 1.3525, a support line from early in the week. It is followed by 1.3435, a stepping stone from the previous week, and then by the 2021 trough of 1.34. The next line to watch is only 1.3310.

Resistance is at 1.3590, a cushion from earlier this week, followed by the weekly high of 1.3650. Next up, 1.3695 awaits bulls.