Bearish View

• Sell the GBP/USD pair and set a take-profit at 1.2000.
• Add a stop-loss at 1.2300.
• Timeline: 1-2 days.

Bullish View

• Buy the GBP/USD pair and set a take-profit at 1.2300.
• Add a stop-loss at 1.2050.

(Click on image to enlarge)

The GBP/USD exchange rate resumed its downward trend after the recent UK and US economic numbers. The pair dropped to a low of 1.2170 and is nearing its lowest level since October 2023. It has fallen by almost 10% from its highest level in 2024.

The GBP/USD pair retreated after the latest UK economic numbers. According to the Office of National Statistics (ONS), the economy grew by 0.1% in November, missing the analysts estimate of 0.2%. This growth translated to a year-on-year rate of 1.0%, lower than the expected 1.3%.

Industrial production dropped by 0.4% in November, while manufacturing fell by 0.3%. More data showed that the trade deficit continued to grow, reaching $19.3 billion.

The GBP/USD pair also dropped after a report showed that inflation was lower than the median estimate. According to the ONS, the headline Consumer Price Index (CPI) dropped from 2.6% to 2.5%, lower than the expected 2.6%. Core inflation fell from 3.5% to 3.2%.

These numbers mean that the Bank of England will likely become more dovish this year after embracing a more cautious tone in 2024.

The Federal Reserve, on the other hand, is expected to maintain a hawkish tone as Donald Trump takes charge. The bank is expected to deliver just two interest rate cuts this year, with some analysts expecting it to avoid cutting.

Recent data showed that the US inflation remained elevated in December as the headline Consumer Price Index rose from 2.7% to 2.9% in December. The labor market is still strong, with the unemployment rate falling from 4.2% in November to 4.1% in December.

GBP/USD technical analysis

The daily chart shows that the GBP/USD pair has continued its strong downtrend this month. It recently dropped and then retested the key point at 1.2298, its lowest point in April last year. A break and retest is a popular bearish continuation sign.

The pair has remained below the 50-day moving average. Also, the MACD indicator has remained below the zero line since October 16. The Relative Strength Index (RSI) has continued falling and is nearing the oversold level.

Therefore, the pair will likely continue falling as traders target the psychological point at 1.2000. The stop-loss of this trade is 1.2300.

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