Bearish View
- Sell the GBP/USD pair and set a take-profit at 1.2000.
- Add a stop-loss at 1.2260.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.2210 and a take-profit at 1.2325.
- Add a stop-loss at 1.2150.
The GBP/USD exchange rate pulled back to the lowest level since December 7 after the latest American building permits and housing starts numbers. It also dropped to a low of 1.2098 ahead of the upcoming American consumer confidence data.
US consumer confidence data
The GBP/USD price pulled back as the UK economy continued to experience significant strikes. Several important workers are staging daily strikes as workers complain of low wages at a time of soaring inflation. Workers, including those at the National Health Service (NHS), Royal Mail, and in the rail industry have been striking.
These strikes will have an impact on the British economy. Analysts expect that these strikes could hit the economy by 0.5% as 1.5 million days are expected to get lost this month. As such, they will make the situation much worse considering that the country is already in a recession.
The strikes came a week after the Bank of England (BoE) delivered its decision. In it, the bank decided to hike interest rates by 0.50% and hinted that inflation may have peaked. It signaled that the bank will likely hit a strategic pause in the coming months.
The GBP/USD price dropped after the US published the latest housing starts and building permits data. According to the Census Bureau, housing starts dropped by 0.5% to 1.42 million. Building permits plunged by 11.2% to 1.32 million in a sign that high interest rates were having an impact on the housing market.
The pair will react moderately to the upcoming consumer confidence data by the Conference Board. Economists polled by Reuters expect the data to show that confidence rose slightly from 100.2 in November to 101.0 in December. Consumer confidence is an important data because consumer spending is the biggest part of the American economy.
GBP/USD forecast
The GBP/USD pair continued its bearish trend ahead of the upcoming consumer confidence data. As it dropped, it moved below the lower side of the ascending channel shown in orange. The pair’s downward trend is being supported by the 25-day and 50-day moving averages. The two have even formed a bearish crossover.
Meanwhile, the MACD and the Awesome Oscillator moved below the neutral point. Therefore, the pair will likely continue falling as sellers target the next key psychological level of 1.2000.
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