Bearish View
- Sell the GBP/USD pair and set a take-profit at 1.2345.
- Add a stop-loss at 1.2625.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 1.2617 and a take-profit at 1.2720.
- Add a stop-loss at 1.2400.
The GBP/USD exchange rate continued its downtrend after hawkish Federal Reserve minutes and statement from Austan Goolsbee. The pair retreated to 1.2537 on Wednesday, its third consecutive day of losses. It has dropped sharply from last month’s high of 1.3433.
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Hawkish Federal Reserve Minutes
The GBP/USD pair retreated after the latest Federal Reserve minutes showed that officials favored a more gradual pace of cuts.
Officials noted that the gradual pace of cuts will be necessary if future economic numbers show that inflation was heading towards the target of 2.0%.
In a statement, Fed’s Austan Goolsbee noted that it made sense to slow the pace of cuts. Therefore, analysts anticipate the bank to maintain status quo in the coming meeting in December.
The Fed minutes came a few hours after the US published mixed economic data. According to the Conference Board, new home sales dropped by 17.3% in October, while the consumer confidence rose to 111.7 from the previous 109.6.
The next key data to watch will be the upcoming US GDP, initial and continuing jobless claims, durable goods, and PCE data. The PCE report is important because if the Fed’s favorite inflation gauge.
The volume in the forex market will likely be low because of the Thankgiving holiday in the United States. There will also be no data from the United Kingdom.
A potential catalyst for the pair will be a statement from Donald Trump, the incoming president. On Monday, he sent jitters in the market when he announced plans for new tariffs on imports from key countries like Canada, China, and Mexico.
GBP/USD Technical Analysis
The daily chart shows that the GBP/USD exchange rate has been in a strong bearish trend in the past few weeks. It has now moved below the 61.8% Fibonacci Retracement level at 1.2573.
The Relative Strength Index (RSI) and the MACD indicator have pointed downwards, while the pair remains below the Ichimoku cloud. It has also moved to the extreme oversold level of the Murrey Math Lines.
Therefore, the pair will likely continue falling as sellers target the next key support at 1.2345, which is the 78.2% retracement level. On the flip side, a move above the ultimate support of the Murrey Math Lines will invalidate the bearish view.
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