GBP/USD Forecast: consolidating after Friday's flash crash

Haresh Menghani FXStreet

The US Dollar snapped the recent bullish momentum against its major counterparts on Friday after the US monthly jobs report failed to alter investors’ expectations over the timing of next Fed rate-hike move. However, the British Pound's flash-crash during early Asian session grabbed all the attention on Friday but the cause of unraveling in the UK currency remained a mystery.

Friday's NFP headline showed the US economy added 156,000 new jobs in September, slowing further from previous month's upwardly revised 167,000. The slower pace of job creation hinted towards a possible slowdown in the US economy since last year, but labor market remains one of the brightest spots of the US economy, which characterized by moderate overall economic recovery.

Meanwhile, improvement in Donald Trump's performance during the second presidential debate between curbed investor risk-appetite on Monday, with both the GBP/USD and the EUR/USD pairs holding failing to recover from a mildly weekly gap lower opening. With US banks closed on Monday in observance of Columbus Day, a relatively thin economic docket from UK and Euro-zone seems unlikely to provide any momentum and the British Pound would continue to react to any fresh Brexit related news.

Technical Outlook

GBP/USD

The pair now seems to have found immediate support around 1.2400-1.2390 region, marking 50% Fibonacci retracement level of 1.2760-1.2020 recent plunge. A sustained weakness below this immediate support seems to drag the pair back towards 38.2% Fibonacci retracement level support near 1.2300 handle below which it gets exposed to 23.6% Fibonacci retracement level support near 1.2200-1.2190 region.

On the flip side, momentum above 1.2440 immediate horizontal resistance is likely to get extended immediately towards 61.8% Fibonacci retracement level resistance near 1.2475-80 region, which if conquered should assist the pair to extend its recovery trend further towards 1.2600 round figure mark.

EUR/USD

The pair remains confined within a short-term trading range but now seems to be confronting immediate resistance near 1.1200 handle. Hence, a follow through selling pressure below 1.1170 should drag the pair back towards 1.1150-45 region en-route 1.1120 strong support area.

Meanwhile on the upside, a convincing move above 1.1200 handle should assist the pair towards a short-term descending trend-line resistance, currently near 1.1240-45 region, above which any near-term bearish bias gets negated and the pair could immediately rally beyond 1.1300 handle towards its next major hurdle near 1.1350 area.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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