Bearish view
Sell the GBP/USD pair and set a take-profit at 1.3150.
Add a stop-loss at 1.3400.
Timeline: 1-2 days.
Bullish view
Buy the GBP/USD pair and set a take-profit at 1.3400.
Add a stop-loss at 1.3150.
The GBP/USD exchange rate has pulled back substantially in the past few days, moving from this month’s high of 1.3558 to the current 1.3291. It will likely be highly volatile ahead of key US macro data and the upcoming Federal Reserve and Bank of England (BoE) interest rate decisions.
Macro Data and Interest Rate Decisions
The GBP/USD pair has remained under pressure in the past few days as investors reacted to several important data. Last week, the Office of National Statistics (ONS) published mixed jobs, inflation, and retail sales numbers.
A report by the ONS showed that inflation dropped in June, undershooting expectations for three consecutive months. Inflation has, however, remained above the 2% target in the past few years. Another report showed that the country’s retail sales jumped in June this year.
The Bank of England is expected to deliver its interest rate decision on Thursday. While Andrew Bailey and the team are expected to keep interest rates unchanged, there is a possibility that they will have a hawkish tilt.
The GBP/USD pair will react to several important macro data later today. For example, the Conference Board will publish the latest consumer confidence report. Economists expect the data to show that confidence rose to 92.1 this month from the previous 91.2. Consumer confidence is important because consumer spending is the biggest part of the US economy. The US will also publish the latest house price index report later today.
Most importantly, the Federal Reserve will deliver its interest rate decision on Wednesday. Economists expect the bank to leave rates unchanged between 3.50% and 3.75%. The bank may also signal that it will hike interest rates later this year as inflation has remained above the 2% target for a while.
GBP/USD Technical Analysis
The daily chart shows that the GBP/USD pair peaked at 1.3558 earlier this month and then resumed the downtrend as the US dollar rebounded. It dropped to a low of 1.3293, its lowest level since July 2. It remains below the 50-day Exponential Moving Average (EMA).
The Relative Strength Index (RSI) has dropped and moved below the neutral level of 50, a sign that the downtrend is continuing. Therefore, the pair will likely continue falling, potentially to the key support level of 1.3150, its lowest level on June 24.
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