Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.2800.
- Add a stop-loss at 1.2600.
- Timeline: 1-2 days.
Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.2600.
- Add a stop-loss at 1.2700.
The GBP/USD exchange rate surged to its highest level since December 12, up by about 5% from its lowest level this year. It rose to 1.2700, up from the year-to-date low of 1.2090, as the US dollar index crashed.
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US dollar index crashes
The GBP/USD exchange rate continued its strong rally as the US dollar index plunged by over 1% in the American session. The dollar plunged as the odds of rate cuts by the Federal Reserve.
These odds are evidenced by the performance of the US bond market as yields crashed. The ten-year yield dropped to 4.20%, its lowest level since December 6, while the 30-year fell to 4.45%.
Falling bond yields is a sign that the market expects the Federal Reserve to start slashing interest rates now that the economic growth is softening. A tracking figure by the Atlanta Federal Reserve estimates that the economy will have a negative growth in the first quarter because of Donald Trump’s tariffs and Elon Musk’s job cuts.
The GBP/USD pair rose after the UK published encouraging economic numbers. According to S&P Global, the country’s manufacturing PMI came in at 46.9, higher than the median estimate of 46.4.
Another report by the Bank of England (BoE) showed that net lending to individuals rose to £5.9 billion in January, higher than the previous £4.6 billion. Mortgage approvals rose to 66.2k, while mortgage lending rose to £4.2 billion.
The GBP/USD pair also rose after the mixed economic numbers from the United States. The manufacturing PMI rose to 52.7 in February, while another one by the ISM showed that the figure rose to 50.3.
GBP/USD technical analysis
The GBP/USD pair continued its strong rally this week, reaching a high of 1.2707, its highest level since December 17. It has soared from a low of 1.2090 as the US dollar index retreated.
The pair has moved above the 50-day and 100-day Weighted Moving Average (WMA) and the 38.2% Fibonacci Retracement point. It is approaching the 50% Fibonacci Retracement level at 1.2765.
Oscillators like the Relative Strength Index (RSI) and the MACD indicators have continued soaring, a sign that the trend is strengthening. Therefore, the pair will likely continue rising in the next few days, with the next point to watch being at 1.2800.
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