Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.3045.
- Add a stop-loss at 1.2600.
- Timeline: 1-2 days.
Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.2600.
- Add a stop-loss at 1.2900.
The GBP/USD exchange rate is hovering near its lowest level since May 8, down by over 3.15% from its highest level this year. It was trading at 1.2790 on Wednesday, near the 50-day moving average, ahead of the upcoming Fed minutes.
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FOMC minutes ahead
The GBP/USD pair wavered as hopes that Donald Trump’s trade war will moderate in the coming days. In a statement on Tuesday, Karoline Leavit said that the administration was in talks with about 70 countries, including Japan and South Korea.
Hopes of a trade deal between the US and other countries will be a good thing as it will help to ease global tensions that have pushed the fear and greed index to extreme fear zone of 5.
Analysts expect that the UK and the US will reach an agreement in the next few weeks because of the relatively stable relationship between Trump and Keir Starmer. The UK also wants a deal after the Brexit vote. Also, Trump views the UK favorably because the US has a trade surplus with the UK.
The next key catalyst will be the minutes of the last meeting. These minutes will provide more color about the last meeting, in which officials left interest rates unchanged at 4.50%. Officials also signaled that the bank would deliver two cuts later this year.
The challenge, however, is the economy has changed drastically since the last meeting because of Trump’s tariffs. Analysts now expect the bank to deliver more rate cuts later this year if the US sinks into a recession.
The GBP/USD pair will also react to the upcoming US consumer inflation data on Thursday. Economists expect the data to show that inflation moved downwards in March, though this could change once tariffs set in.
GBP/USD technical analysis
The daily chart shows that the GBP/USD exchange rate rose to a high of 1.3210 last week as the trade war escalated. It then retreated to a low of 1.2790, its lowest swing since March 4 this year.
The pair has moved below the key support at 1.3045, the highest swing in November, and the upper side of the cup and handle pattern. Therefore, there is a likelihood that the recent retreat was part of the handle section.
The GBP/USD pair remains above the 50-day and 100-day moving averages. Therefore, the pair will likely have a bullish breakout, with the initial target being at 1.3045.
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