Bearish view
Sell the GBP/USD pair and set a take-profit at 1.3000.
Add a stop-loss at 1.3300.
Timeline: 1-2 days.
Bullish view
Buy the GBP/USD pair and set a take-profit at 1.3300.
Add a stop-loss at 1.3000.
The GBP/USD exchange rate continued its strong downward trend this week, reaching its lowest level since November 28 last year. It has slumped to 1.3180, down by over 5% from its highest point this year.
US Dollar and Energy Prices Soar
The GBP/USD pair continued its strong downward trend this week as the US Dollar Index (DXY) jumped to over $100. Energy prices have continued soaring, with Brent hovering at $115.
Crude oil prices continued rising as Yemen's Ansah Allah entered the war by launching attacks towards Israel. The group is actively considering shutting trade in the Red Sea, which will affect the energy flows from the Middle East. It will also affect important products like fertilizer and helium.
The next important catalyst for the GBP/USD pair will be the upcoming US consumer confidence report by the Conference Board. Economists polled by Reuters expect the upcoming data to show that the consumer confidence plunged to 88 in March from the previous 91.2.
The US will also publish the latest house price index report, which is expected to come in at minus 0.2%, down from the previous 1.8%.
Austan Goolsbee, a top Federal Reserve official, will also talk later on Tuesday. This statement will come at a time when some experts are predicting that the Federal Reserve will cut interest rates later this year. This explains why US bond yields retreated on Monday, with the 10-year falling by over 2% to 4.35%.
The other important catalyst for the GBP/USD pair will be the upcoming UK GDP and housing report. Economists expect the upcoming data to show that the economy eased from 1.2% in the third quarter to 1.0% in Q4.
GBP/USD Technical Analysis
The daily timeframe chart shows that the GBP/USD exchange rate has retreated in the past few months, moving from a high of 1.3871 in January to 1.3183. It has dropped to its lowest level since December 2nd.
The pair has moved below the ascending trendline, which coincides with the lowest swings in November last year and this month. It is also nearing the death cross pattern, which happens when the 50-day and 200-day Exponential Moving Averages (EMA) cross each other.
Therefore, the pair will likely continue falling, potentially to the psychological level at 1.3000. A move above the resistance level at 1.3300 will invalidate the bearish outlook.