Bearish view
Sell the GBP/USD pair and set a take-profit at 1.3185.
Add a stop-loss at 1.3310.
Timeline: 1-2 days.
Bullish view
Buy the GBP/USD pair and set a take-profit at 1.3310.
Add a stop-loss at 1.3185.
The GBP/USD exchange rate made a strong bearish breakout, reaching its lowest level since October 28. It has dropped by 1.65% from its highest point this month, with focus being on the upcoming UK GDP, manufacturing, and industrial production numbers.
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UK GDP Data and Rising US Bond Yields
The GBP/USD pair continued to rise as US bond yields rebounded, with the 10-year yield crossing the key resistance level of 5%. Similarly, the 30-year and five-year yields jumped to 5.4% and 4.8%, respectively. The rally in yields intensified after the US published strong jobs and inflation data. The jobs report showed the unemployment rate dropped to 4.1%, while inflation rose 0.4% month-over-month.
These numbers have led to a rise in interest rate hike odds. The probability that the Fed will hike interest rates in December jumped to over 90%. Indeed, some analysts believe that the bank will hike rates by 0.50%. Some Fed officials have hinted that they will support several rate hikes instead of a jumbo increase.
The GBP/USD pair also dropped as crude oil prices rebounded. Brent and the West Texas Intermediate (WTI) jumped to $94 and $88, respectively.
Looking ahead, the next important GBP/USD news to watch will be key macro numbers from the United Kingdom. The Office of National Statistics (ONS) will release the latest GDP, manufacturing, and industrial production numbers. Economists expect the data to show that the economy grew by 0.7% in the third quarter after growing by 0.5% in Q2.
Economists also expect the data to show that the country’s manufacturing and industrial production dropped in September. Recently, however, UK macro data have been stronger than expected, which explains why the Bank of England (BoE) decided to hike interest rates last week.
GBP/USD Technical Analysis
The daily chart shows that the GBP/USD pair has been in a strong sell-off in the past few weeks. It has slumped from a high of 1.3503 in November to the current 1.3280.
The pair has slumped below the 50-day and 200-day Exponential Moving Averages (EMA). Also, it has dropped below the Strong, Pivot, Reverse level of the Murrey Math Lines tool.
The pair is attempting to move below the support level of 1.3272, its lowest level on October 28. Therefore, the pair will likely continue falling as sellers target the key support level of 1.3184, the Ultimate Support of the Murrey Math Lines tool.
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