GBP/USD Signal: Retreats After Hitting Key Resistance as Fed Rate Hike Odds Jump

Bearish view

-- Sell the GBP/USD pair and set a take-profit at 1.3470.

-- Add a stop-loss at 1.3600.

-- Timeline: 1-2 days.

Bullish view

-- Buy the GBP/USD pair and set a take-profit at 1.3600.

-- Add a stop-loss at 1.3470.

The GBP/USD exchange rate dropped sharply as investors reacted to the highly hawkish statement from Kevin Warsh at the Jackson Hole Symposium. It retreated to 1.3534, down modestly from this month’s high of 1.3675.

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Hawkish Federal Reserve Chair Boosts Rate Hikes Odds

The GBP/USD pair dropped sharply as investors focused on Kevin Warsh’s first statement at the Jackson Hole Symposium. In it, he maintained his view that inflation remained stubbornly high in the United States and insisted that the Federal Reserve would work hard to bring it to the 2% target.

As a result, the prediction market sees the Fed hiking rates in the December meeting. Odds of the rate hike happening jumped to 68% on Polymarket and Kalshi, two of the biggest companies in the industry.

Warsh’s statement has likely irked President Donald Trump, who has argued that inflation was subdued and that the US should pay the lowest interest rates in the world. However, the US also faces the biggest debt burden, with the public debt soaring to over $40.09 trillion.

Focus this week will be on the upcoming US nonfarm payrolls (NFP) data, which will provide insights into the labor market. Economists expect the upcoming report to show that the economy added 58k jobs in August after losing 23k in July.

This report will come exactly a week after the US released a lower-than-expected jobs revisions report. This report showed that the level of employment as of March is estimated to be 79k jobs lower than expected. Last year, this revision came 911k lower.

The GBP/USD pair also reacted to Andrew Bailey’s statement at the Jackson Hole forum. In it, he said that the US-Iran war was creating a major inflation crisis, as evidenced by the rising diesel prices. Markets are now pricing in a 0.25% rate hike later this year.

EURUSD Chart by TradingView

GBP/USD Technical Analysis

The daily chart shows that the GBP/USD pair suffered a big reversal after hitting the important resistance level of 1.3652. This resistance coincided with the highest swing on May 1 this year.

It has now dropped and moved below the 23.6% Fibonacci Retracement level. This retracement connects the lowest level in June and the highest swing in August.

The pair remains slightly above the 50-day Exponential Moving Average (EMA), while the Relative Strength Index (RSI) has reversed and is about to move below the neutral level of 50.

Therefore, the pair’s path of the least resistance is lower, with the immediate target being the 38.2% retracement level of 1.3470. A move above the resistance level of 1.3652 will point to more gains this year.

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