Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.1850.
- Add a stop-loss at 1.2200.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.2135 and a take-profit at 1.2230.
- Add a stop-loss at 1.2050.
The GBP/USD price retreated to the lowest level since December 1 as the US dollar rebounded and bond yields pulled back. Sterling also pulled back as the market assessed the impact of the ongoing strikes.It dropped to a low of 1.2060, which was lower than this month’s high of 1.2452.
US and UK GDP data ahead
The GBP/USD price pulled back ahead of the upcoming UK GDP data. Economists polled by Reuters expect the data to show that the economy contracted by 0.3% on a quarter-on-quarter basis. On a year-on-year basis, they expect that the economy expanded by 2.4%.
These numbers will come as the UK goes through a series of strikes from some of the most important sectors. Workers in key companies like rail, healthcare, and airports are striking in protest of low wages in a period of soaring inflation. Economists expect that these strikes will knock off the GDP by about 0.1%.
The contraction happens at a time when the Bank of England (BoE) is hiking interest rates. Last week, the bank decided to hike rates by 0.50% and hinted that more hikes were coming in 2023.
The GBP/USD exchange rate dropped as the US dollar index jumped by 30 basis points. This rebound happened after Conference Board published the latest consumer confidence data. The agency said that consumer confidence rose from 101.4 in November to 108.3 in December. This increase happened as expectations of the economy improved.
The pair will next react to the final reading of US GDP data. Economists expect the data to show that the economy rebounded by 2.9% in Q3 after slipping in the first and second quarters. The data will likely have no major impact since it wil be the third estimate. The US will also publish the latest initial and continuing jobless claims data.
GBP/USD forecast
The GBP/USD pair continued falling as concerns about the UK economy continued. It dropped below the 25-day and 50-day moving averages. The pair also moved below the standard pivot point and the lower side of the ascending channel pattern shown in yellow. At the same time, the Relative Strength Index (RSI) moved below 40.
The pair will likely continue falling, with the next key support level to watch being at 1.1850. The stop-loss of this trade will be at 1.2215.
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