GBP/USD: Effects of the USA Government Shutdown?

30 Sep 2023

GBP/USD reversed its direction and dropped below 1.2200 during the American session on Friday, after rising above 1.2270 earlier in the day. Position readjustments and profit-taking on the last trading day of the quarter seem to be weighing on the British Pound. If the pair stages a technical correction, it could face resistance at 1.2200 (20-period Simple Moving Average, mid-point of the descending regression channel), 1.2240 (upper limit of the descending channel), and 1.2300 (psychological level, 50-period SMA). On the downside, 1.2130 (static level from February) aligns as immediate support before 1.2100 (psychological level, static level) and 1.2050 (static level). GBP/USD broke through 1.2200 on Tuesday and extended its slide to a fresh six-month low below 1.2150. The near-term technical picture shows that the pair remains oversold. Investors, however, could opt to wait for a steady improvement in risk mood before positioning themselves for a convincing recovery in the pair. Wall Street's main indexes lost more than 1% on Tuesday amid growing fears over a US government shutdown. Although US stock index futures trade modestly higher, participants could refrain from betting on a risk rally unless Republicans and Democrats agree on a bipartisan spending bill ahead of Sunday's deadline. Later in the day, the US Census Bureau will release Durable Goods Orders data for August. Markets expect a 0.5% decrease following the 5.2% contraction recorded in July. If there is another big decline in this data, the initial reaction could hurt the USD. The US Department of Treasury will hold a 5-year US Treasury note auction in the American session on Thursday. In case there is a strong demand for bonds and a noticeable decline in the high-yield outcome, the USD could lose its strength. Nonetheless, investors are likely to stay focused on political developments in the US. In summary, the chart indicates a slightly bullish structure from Thursday, confirmed by the break of a swing high at the 1.2221 level. There's also an upward trendline supporting the price in this rise. A bounce off the trendline is expected to better assess a potential long or short exposure. Comment and leave a like to support our work. Greetings and have a good weekend from Nicola, the CEO of Forex48 Trading Academy.