Bearish view
- Set a sell-stop at 1.2000 and a take-profit at 1.1915.
- Add a stop-loss at 1.2100.
- Timeline: 1-2 days.
Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.2145.
- Add a stop-loss at 1.1950.
The GBP/USD exchange rate was muted on Tuesday morning as the focus remained on the upcoming UK budget and Fed Chair statement. The pair was trading at 1.2032, which was a few points above the year-to-date low of 1.1918.
Jerome Powell statement
The US dollar pulled back slightly as bets increased that the currency’s recent rebound had peaked. The dollar index dropped to $104.24, which was lower than last month’s high of $105.50. American stocks also had a small relief rally, with the Nasdaq 100 index rising by 40 points.
The main driver for the GBP/USD pair will be the upcoming Fed Chair testimony in congress. In his statement, he will talk about the actions the bank is taking to fight the elevated inflation. Like in his other statements, Powell will likely maintain a hawkish tone considering that inflation remains above 6%.
The keyword to watch in his statement will be deflation. In his previous statement after the US jobs numbers, Powell said that inflation was falling. But he also noted that it will be difficult to fight this inflation with the unemployment rate being at 3.4%.
Powell’s statement will come in an important week for the market. For example, the US will publish the latest jobs numbers on Friday. Economists believe that the labor market continued tightening in February, with the unemployment rate set to remain at 3.4%. These numbers will be followed by the latest consumer inflation data scheduled for Tuesday.
The GBP/USD pair will also react to the upcoming debate on UK’s budget. Conservatives are pushing the Rishi Sunak administration to cut taxes for companies. They are also pushing the government not to move on with an upcoming corporate tax hike.
GBP/USD technical analysis
The 4H chart shows that the GBP/USD pair has moved sideways in the past few days. It is stuck at the Woodie pivot point and moved slightly above the 25-day and 50-day moving averages. The pair has moved between the important support and resistance levels at 1.1917 and 1.2145. It is also between the 61.8% and 71.8% Fibonacci Retracement level.
Therefore, the outlook of the pair is neutral. A bullish breakout will see the pair jump to the key resistance point at 1.2145. A bearish breakout, on the other hand, will see the pair test the key support level at 1.1918.
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