GBP/USD Forex Signal: Falling Wedge Pattern Forms Ahead of BoE

Bullish view

• Buy the GBP/USD pair and set a take-profit at 1.2900.
• Add a stop-loss at 1.2785.
• Timeline: 1-2 days.

Bearish view

• Set a sell-stop at 1.2845 and a take-profit at 1.2785.
• Add a stop-loss at 1.2900.

The GBP/USD exchange rate rose slightly after the July ADP nonfarm private payroll data and the Federal Reserve interest rate decision. It rose to 1.2860 as investors focused on the upcoming Bank of England decision and Friday’s NFP data.

BoE decision and NFP numbers

The US labor market softened in July as signs of an economic slowdown emerged. In a report, ADP said that the private sector added 122,000 jobs in July after adding 155,000 in the previous month. These additions were fewer than the median estimate of 147,000.

The report came two days ahead of the official nonfarm payrolls data. While the headline NFP report will be watched, traders and economists will mostly focus on the unemployment rate, which has been in a slow increase. It has moved to 4.%, its highest point since 2021.

These numbers will help to determine whether the Fed will start cutting rates in its September meeting. In a statement on Wednesday, the Fed decided to leave rates unchanged between 5.25% and 5.50%.

The Fed’s statement noted that it was now focused on the two sides of the dual mandate of ensuring low inflation and unemployment rate. In a statement, Jerome Powell said that the door for a rate cut in September was wide open. As such, signs that the jobless rate is not improving will hasten the case.

The GBP/USD will be the top pair to watch on Thursday as the Bank of England will also make its decision. Analysts expect the bank will likely cut interest rates by 0.25% for the first time in years.

The bank has already achieved its inflation target of 2.0% while the economy is showing signs of slowing down. Just this week, Rachel Reeves, the new Chancellor of the Exchequer noted that the government was facing a $22 billion budget hole.

GBP/USD technical analysis

The GBP/USD exchange rate has been in a steep downtrend ahead of the BoE and Fed interest rates decisions. It has moved below the 23.6% Fibonacci Retracement point.

The pair has also remained slightly below the 50-period and 25-period moving averages. Most importantly, it has formed a falling wedge chart pattern, a popular bullish sign. Therefore, the pair will likely bounce back as buyers target the key resistance level at 1.2895, its highest swing on March 8.

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