Bearish view
Sell the GBP/USD pair and set a take-profit at 1.3350.
Add a stop-loss at 1.3550.
Timeline: 1-2 days.
Bullish view
Buy the GBP/USD pair and set a take-profit at 1.3550.
Add a stop-loss at 1.3350.
The GBP/USD pair remained in a narrow range as traders watched the ongoing developments on the US-Iran crisis. It also wavered after the Conference Board published an encouraging consumer confidence report. It was trading at 1.3440, inside the narrow range where it was a few days ago.
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US Consumer Confidence Steady Despite Elevated Inflation
The GBP/USD pair remained in a tight range as investors reacted to the latest US consumer confidence report. Data released by the Conference Board showed that consumer confidence dropped to 93.1 in May from 93.8 in April. The decline was slower than the median estimate of 91.9.
Another report showed that the US house price index rose by 1.7% in March, a sign that there is still demand for houses in the country. The next key macro data to watch will be the US personal consumption expenditure (PCE) report, which will come out on Thursday.
PCE is a crucial inflation report that looks at consumer prices in the urban and rural areas. Economists expect the report to show that inflation remained at an elevated level in April. The headline consumer inflation jumped to 3.8% from the previous 3.3%. These numbers mean that the Federal Reserve will maintain interest rates steady in the coming months.
The next important driver for the GBP/USD pair will be the ongoing developments between the US and Iran. President Donald Trump raised the odds of an Iran deal, ending the possibility of kinetic activity in the region.
Still, the odds of a deal have eased in the past few days as Israel intensifies its attacks against Hezbollah. Also, Iran has vowed to retaliate against the US after the latter launched strikes against its top targets. A deal would be bullish for the GBP/USD pair as it would lead to a risk-on sentiment.
GBP/USD Technical Analysis
The GBP/USD pair peaked and formed a double-top pattern at 1.3655, leading to a pullback that brought it to a low of 1.3300 on May 18. It then attempted to rebound and found resistance at the psychological level at 1.3500.
The pair is now stuck at the 50% Fibonacci Retracement. It also remains below the 100-day Exponential Moving Average (EMA), and formed a marubozu candlestick pattern. This candle is a common bearish candlestick pattern made up of a body without upper and lower shadows.
Therefore, the pair will likely continue falling, potentially to the key support level at 1.3400. A move above the upper side of the Marubozu at 1.3507 will invalidate the bearish outlook.
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