Bearish view
Sell the GBP/USD pair and set a take-profit at 1.3100.
Add a stop-loss at 1.3300.
Timeframe: 1-2 days.
Bullish view
Buy the GBP/USD pair and set a take-profit at 1.3300.
Add a stop-loss at 1.3100.
The GBP/USD exchange rate has stalled at a crucial support level as the recent sell-off lost momentum. It was trading at 1.3197 today, June 29, a few points above this month’s low of 1.3156.
UK GDP and US NFP Data Ahead
The GBP/USD pair has retreated sharply from the highest point this year. It dropped from a high of 1.3856 to the current 1.3197 as the US dollar continued its strong uptrend. Data shows that the dollar index jumped to its highest level in over a year.
Sterling has also dropped amid the ongoing hopes that the Bank of England (BoE) may start cutting interest rates. In a recent statement, Andrew Bailey, the bank’s head, said that the bank will not be in a hurry to hike rates as recent data showed that inflation was improving.
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The UK will publish the latest GDP numbers on Tuesday, providing more color on the state of the British economy. Economists expect the data to show that the economy grew by 1.1% in the first quarter. They expect the report to show that it grew by 0.6% from the same period last year.
The Federal Reserve, on the other hand, has hinted that it may hike interest rates later this year as inflation has remained above 2%. The most recent data showed that the headline US inflation jumped to 4.2% in May, higher than the bank’s target of 2.0%.
Looking ahead, there will be key macro data from the United States, including consumer confidence, manufacturing and services PMIs, and, most importantly, the non-farm payrolls (NFP) data. Economists expect the data to show that the economy continued adding jobs last month because of the ongoing World Cup event.
GBP/USD Technical Analysis
The daily chart shows that the GBP/USD pair has been in a strong downtrend as the US dollar index jumped. It has fallen from a high of 1.3652 on May 1 to the current 1.3197.
The pair has already slumped below the 50-day moving average, while the Relative Strength Index (RSI) has formed a descending channel.
At the same time, it has found substantial support at 1.3156, its lowest level in March and May. That is a sign that bears are afraid of placing positions below that level.
Therefore, more downside will be confirmed if it drops below the support level of 1.3156. If this happens, the next level to watch will be at 1.3100.
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