GBP/USD Forecast: RSI Recovers from Oversold Territory

British Pound Outlook: GBP/USD

GBP/USD bounces back from a fresh monthly low (1.2037) to snap the recent series of lower highs and lows, and a move above 30 in the Relative Strength Index (RSI) may accompany a larger rebound in the exchange rate like the price action from last year.

GBP/USD Forecast: RSI Recovers from Oversold Territory

Keep in mind, GBP/USD has fallen for the past four consecutive weeks, with the 50-Day SMA (1.2540) now reflecting a negative slope, but the RSI may show the bearish momentum abating as it attempts to climb out of oversold territory.

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Nevertheless, developments coming out of the US may sway GBP/USD as the Bank of England (BoE) halts its hiking-cycle, and the Non-Farm Payrolls (NFP) report may put pressure on the Federal Reserve to further combat inflation as the update is anticipated to show the economy adding 170K jobs in September.

US Economic Calendar

FOREX.com Economic Calendar

At the same time, Average Hourly Earnings are projected to hold steady at 4.3% during the same period, and a positive development may generate a bullish reaction in the US Dollar as it raises the Fed’s scope to implement another rate-hike this year.

However, a weaker-than-expected NFP report may produce headwinds for the Greenback as it encourages the central bank to keep US interest rates unchanged over the remainder of the year, and GBP/USD may attempt to extend the rebound from the monthly low (1.2037) as it snaps the recent series of lower highs and lows.

With that said, a move above 30 in the Relative Strength Index (RSI) may accompany a larger advance in GBP/USD like the price action from 2022, but the exchange rate may develop a bearish trend over the remainder of the year as the 50-Day SMA (1.2540) reflects a negative slope.

GBP/USD Price Chart –Daily

Chart Prepared by David Song, Strategist; GBP/USD on TradingView

• The opening range for October is in focus as GBP/USD snaps the recent series of lower highs and lows, and the exchange rate may attempt to extend the rebound from the monthly low (1.2037) as the Relative Strength Index (RSI) recovers from oversold territory.
• A move above 30 in the RSI is likely to be accompanied by a further advance in GBP/USD like the price action from last year, with a break/close above the former-support zone around 1.2300 (50% Fibonacci retracement) to 1.2390 (38.2% Fibonacci extension) bringing the 1.2470 (50% Fibonacci retracement) to 1.2520 (23.6% Fibonacci extension) region back on the radar.
• However, GBP/USD may track the negative slope in the 50-Day SMA (1.2540) if the former support zone around 1.2300 (50% Fibonacci retracement) to 1.2390 (38.2% Fibonacci extension) offers resistance, and failure to defend the opening range for October may push the exchange rate towards the 1.1780 (50% Fibonacci extension) to 1.1840 (38.2% Fibonacci retracement) area, which incorporates the March low (1.1803).

Additional Market Outlooks

US Dollar Forecast: USD/JPY Remains at Threat of FX Intervention

Australian Dollar Forecast: AUD/USD Faces RBA and US NFP Report

--- Written by David Song, Strategist

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