Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.1700.
- Add a stop-loss at 1.1850.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.1840 and a take-profit at 1.1900.
- Add a stop-loss at 1.1750.
The GBP/USD currency pair was in a tight range on Thursday morning as market participants waited for commentaries by Jerome Powell and Andrew Bailey at the Jackson Hole Symposium. It was trading at 1.1795, which was slightly above this week’s low of 1.1720.
Jackson Hole Symposium
The Federal Reserve and the Bank of England have embraced a more hawkish tone this year as they fought the soaring inflation. The BoE has hiked interest rates in all its meetings since December while the Fed has increased rates by 225 basis points. In their most recent meetings, the two hiked by 50 and 75 basis points, respectively.
There are signs that these rate hikes are having a negative impact on the respective economies. Data published by S&P Global on Tuesday showed that the manufacturing and services PMIs declined sharply in July.
Therefore, the GBP/USD price will likely show some volatility during this week’s Jackson Hole Symposium. The two central bank governors will provide more details about the status of rate hikes and whether they will continue hiking.
Analysts expect that the Fed will hike rates by 0.50% and then shift to smaller increases afterward. On the other hand, the BoE will find it difficult to hike rates as the economy goes through substantial challenges. The BoE expects that inflation will rise to 13% this year. In a report this week, analysts at Citigroup predicted that inflation will rise to 18.3%.
The BoE responds to high inflation by hiking interest rates. However, it is unclear whether interest rates will lower this inflation since it will be caused by rising wholesale gas prices.
The GBP/USD pair will react mildly to US economic data that will come out on Thursday. Economists expect the data to show that the country’s economy contracted in Q2.
GBP/USD forecast
The four-hour chart shows that the GBP/USD pair has been in a strong bearish trend in the past few weeks. It managed to move briefly below the important support level at 1.1760, which was the lowest level in July this year. At the same time, the pair moved below the standard pivot point, the 25-day exponential moving average, and the Ichimoku Cloud.
Therefore, the pair will likely have a bearish breakout as sellers target the first support of the pivot point at 1.1700.
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