Insights 
VT 
The GBP/USD pair experienced heavy selling in early European trading, hitting mid-1.3200s. This marks the lowest level since early August, following a disappointing UK labour market report released by the Office for National Statistics.
UK unemployment rose to 4.8% from the previous 4.7% for the three months to August, with a 25.8K increase in jobless benefit claimants in September. Average Earnings, including bonuses, went up by 5.0%, but regular pay growth fell to 4.7%.
Uk Market Influences
These figures could influence the Bank of England to continue lowering interest rates. The US Dollar’s strength further contributed to pressure on the GBP/USD pair.
The GBP/USD is nearing a two-month low of 1.3260 due to the disappointing UK labour data. The pair is approaching a medium-term ascending trendline, which could potentially support a rebound if the 23.6% Fibonacci retracement level at 1.3370 is reached.
Resistance may also be seen at the mid-level of the Bollinger Band and the 50-day simple moving average in the 1.3435–1.3475 range. The market awaits more data that could further influence the currency pair’s movements.
The weak UK jobs report has clearly shifted sentiment against the pound. This aligns with the latest CPI figures released last week, which showed inflation cooling to 2.1%, missing expectations and falling further from the Bank of England’s target. This puts a rate cut firmly on the table for the November meeting.
Traders Strategy
We see traders positioning for a further slide in GBP/USD by buying put options with strikes around 1.3200 and 1.3150. This strategy offers a defined-risk way to profit if the pair breaks below its current two-month lows. Implied volatility has already climbed to 9% for one-month options, suggesting the market is bracing for more turbulence ahead of the BoE’s decision.
For those looking for a more capital-efficient approach, a bear put spread could be effective. This involves buying a put option, for example at the 1.3250 strike, and selling another put at a lower strike like 1.3150 to help finance the position.
The dollar’s strength is a key part of this equation, especially after last Friday’s US retail sales data beat forecasts, reinforcing the Fed’s steady stance. We saw a similar divergence in monetary policy back in 2016 after the Brexit vote, which led to a sustained period of sterling weakness. That history suggests this downward trend could have legs if the BoE follows through with a cut.
The 200-day moving average, now approaching the 1.3200 level, is the next major target that short-sellers using futures contracts are watching. However, we must be cautious of a short-term bounce from the ascending trendline mentioned, which could trigger a squeeze.
