Bearish View
Sell the GBP/USD pair and set a take-profit at 1.3150.
Add a stop-loss at 1.3325.
Timeline: 1-2 days.
Bullish view
Buy the GBP/USD pair and set a take-profit at 1.3325.
Add a stop-loss at 1.3150.
The GBP/USD exchange rate slumped to its lowest level since March 31 this year. It retreated to 1.3165 on Thursday and then settled at 1.3233, down modestly from last month’s high of 1.3657.
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UK Retail Sales, BoE Decision, and UK Inflation Data
The GBP/USD pair remained under pressure after some major events last week. It retreated after the Office of National Statistics (ONS) delivered positive consumer inflation numbers. The report revealed that the headline consumer inflation report rose 2.8% in May, remaining unchanged from the previous month.
Another report released on Friday showed that its retail sales rose unexpectedly in May, growing by 1.2% MoM. This increase was largely driven by warm weather and retail promotions that boosted departmental stores.
These numbers show that the British economy was doing relatively well despite the growing challenges. They came as the Bank of England (BoE) delivered its interest rate decision. In a 7-2 vote, the central bank decided to leave interest rates unchanged. Analysts predict that the bank will maintain the status quo in the coming months.
The GBP/USD pair also retreated after the Federal Reserve delivered its interest rate decision. In its statement, the bank decided to leave interest rates unchanged between 3.50% and 3.75%. Officials also hinted that they will hike rates later this year, leading to a higher US dollar.
The next key data to watch this week will be the upcoming US flash manufacturing and services PMI numbers. Estimates are that the two PMIs remained above 50 in June, a sign of expansion.
The other key metrics to watch will be the upcoming US PCE data on Thursday. This is an important metric that looks at consumer prices from around the country and is the Fed’s favorite inflation gauge.
GBP/USD Technical Analysis
The daily chart shows that the GBP/USD pair has slumped in the past few months, moving from a high of 1.3657 in May this year to a low of 1.3165. It has retreated below the Strong, Pivot, and Reverse level of the Murrey Math Lines tool.
It has dropped below the 50-day Exponential Moving Average (EMA), a sign that the downtrend continues. A closer look shows that it found some support at 1.3164, its lowest swing in March last year. The pair will likely continue falling in the near term, potentially to the key support of 1.3150.
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