GBP/USD Overview – October 9: Why Is the Pound Falling? Actually, It's Not!

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On Wednesday, the GBP/USD currency pair again traded slightly lower — but only marginally so. In our accompanying article on EUR/USD, we discussed the reasons for the euro's decline (spoiler alert: there are hardly any). Here, we take a closer look at the pound's behavior and ask — why is it falling at all? After all, the political crisis in France has nothing to do with the British currency.

In fact, the answer is already clear. The pound has even fewer reasons to fall than the euro. The situation in France, which can hardly be called a genuine crisis, has no bearing on GBP. Suggesting that the pound is falling due to a political reshuffle in France makes as much sense as blaming it on a change of government in Costa Rica.

We acknowledge that the euro and pound often move in tandem due to their high correlation; however, the euro has more reasons to rise than to fall at present. The conclusion? The current localized decline in both pairs is illogical.

Zooming out to the daily timeframe shows there's no real downtrend in the British currency at all. GBP has been trading sideways for months, remaining near multi-year highs. This effectively means that even now, the market is struggling to mount a proper correction to the dollar's prior depreciation.

The 4-hour timeframe tells a similar story of horizontal movement. What appears as a flat trend on the daily chart is expressed on lower timeframes as a sequence of minor bullish and bearish moves. Therefore, the pound swings up and down without obvious justification in shorter timeframes. It's worth noting that in a flat market, there's no need for meaningful catalysts behind price movements — this phase is often about accumulation or distribution by market makers. During such periods, the macroeconomic context can have muted relevance.

Only after the current range is broken will we know which direction large institutional players have chosen for the dollar — because make no mistake, in 2025, the dollar remains the main player.

Elsewhere this week, Jerome Powell is scheduled to speak today, and his comments may address the government shutdown and the Federal Reserve's plans for its October 29 meeting, given the lack of critical economic data. With no hiring, unemployment, or inflation data available, how can a policy decision be made?

We believe this question is extremely important. Of course, the U.S. labor market won't fully recover in a single month following a rate cut from the Fed. But at the same time, how can decisions be based on nothing at all?

The ADP employment report for September showed a negative result, but it's worth remembering that ADP has always been secondary to the Nonfarm Payrolls report — and often, the two diverge. In that sense, a weak ADP figure doesn't automatically mean weak NFPs. All of this only complicates the Fed's task.

In our view, regardless of Powell's communication approach, the dollar is still headed in one direction — down. The Fed will likely cut interest rates further over the next several years. Meanwhile, the Bank of England has either already paused or is close to ending its tightening cycle, as UK inflation remains more than twice the target level.

As of October 9, the average daily volatility of GBP/USD over the past five trading days is 81 pips — a typical range for this pair. On Thursday, we expect the pair to trade between 1.3292 and 1.3454. The higher linear regression channel is pointing upward, confirming the broader bullish trend. The CCI indicator recently entered oversold territory, hinting at a potential resumption of the uptrend.

Support levels:

S1 – 1.3367

S2 – 1.3306

S3 – 1.3245

Resistance levels:

R1 – 1.3428

R2 – 1.3489

R3 – 1.3550

Trading Recommendations:

The GBP/USD pair is experiencing a modest correction, but long-term prospects remain unchanged. Donald Trump's policies continue to weigh heavily on the U.S. dollar, making further dollar strength unlikely.

Thus, as long as the price remains above the moving average, long positions targeting 1.3672 and 1.3733 remain relevant. If the price moves below the smoothing line, traders may consider small short positions toward 1.3306 and 1.3292 on a technical basis.

USD corrections like the current one are possible from time to time, but sustainable dollar strength would require actual progress in resolving the trade war or a major shift in global sentiment — neither of which appears on the horizon.

Commentary on Chart Indicators:

• Linear Regression Channels help identify the dominant trend. If both channels point in the same direction, the trend is considered strong.
• The Moving Average (20,0, smoothed) defines the short-term trend and suggests trade direction.
• Murray Levels present key pivot points for movements and corrections.
• Volatility Bands (red lines) outline the probable daily trading range, based on current volatility.
• The CCI Indicator signals potential trend reversals when entering overbought (above +250) or oversold areas (below -250).

The material has been provided by InstaForex Company - www.instaforex.com