• The GBP/USD price analysis indicates escalating concerns about the UK’s fiscal health.
• The UK 30-year yield rose to its highest point since May 1998.
• The US will release its non-farm payrolls report on Friday, providing an update on the state of the labor market.

The GBP/USD price analysis indicates escalating concerns about the UK’s fiscal health, which is weighing on bonds and the pound. Meanwhile, traders are gearing up for the crucial US monthly employment report, which will shape the outlook for Fed rate cuts.

The UK 30-year yield rose to its highest point since May 1998 amid worries about UK finances. As a result, the pound collapsed. The government has to balance heavy borrowing, a weak economy, and high inflation. However, investors have lost some confidence. Therefore, sterling could face a lot of downward pressure ahead of the next budget reading.

“While a repricing of Bank of England expectations had helped sterling last month, the UK is going to be vulnerable to fiscal risks as the autumn budget approaches, which is likely to remain a headwind for sterling,” said Rabobank’s head of FX strategy, Jane Foley.

Elsewhere, the US will release its nonfarm payrolls report on Friday, showing the state of the labor market. Further weakness could revive bets for a 50-bps cut. On the other hand, if the sector is resilient, rate cut expectations will ease.
 

GBP/USD key events today

• US ISM Manufacturing PMI
   

GBP/USD technical price analysis: Bears challenge the 1.3401 support
 

(Click on image to enlarge)

GBP/USD 4-hour chart
 

On the technical side, the GBP/USD price has collapsed and is on the verge of breaking below the 1.3401 key support level. It trades well below the 30-SMA, showing bears are in the lead. At the same time, the RSI has dipped into the oversold region, indicating solid bearish momentum. Bears took over after bulls failed to continue the previous rally. 

Although price action showed solid bullish momentum, the price remained in a corrective move, chopping through the 30-SMA. Bulls struggled to detach from the SMA and retest the 1.3575 key resistance level. As a result, bears returned and made an impulsive move below the SMA. 

A break below the 1.3401 support would solidify the bearish bias. Moreover, it would allow GBP/USD to retest the 1.3200 support level. On the other hand, if the support holds firm, bulls will return to target the 1.3575 resistance level.

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