Bearish view
Bullish view
- Buy the GBP/USD pair and add a take-profit at 1.2500.
- Add a stop-loss at 1.2270.
The GBP/USD exchange rate drifted downwards as traders embraced a risk-off sentiment ahead of the upcoming US inflation data and bank earnings. The pair dropped to a low of 1.2345, the lowest level since April 3rd.
Risk-off sentiment
Traders have embraced a risk-off sentiment as concerns about the American economy remain. This is evidenced by the fact that the US dollar index jumped by more than 50 basis points in the overnight session.
Similarly, American stocks declined, with the Nasdaq 100 index falling by over 100 points. In the bond market, the yield of the 10-year government bonds jumped to 3.40% while the 2-year rose to 4% for the first time in weeks.
The main reason for this price action was the American job report published on Friday and the upcoming inflation and Fed minutes numbers. On Friday, data by the Bureau of Labor Statistics showed that the country’s economy added over 236k jobs in March while the unemployment rate dropped to 3.5%.
The next key GBP/USD news will be a statement by Patrick Harker of the Philadelphia Federal Reserve. In it, he will likely insist that the Fed has more room to hike in the coming meeting. Harker has been one of the top Fed officials to support rate cuts in 2024.
The biggest catalyst for the pair will be the latest American inflation data scheduled for Wednesday. These numbers will provide more information on whether the Fed’s actions are working to beat inflation. Economists expect the numbers to show that the country’s inflation dropped to 5.2% while core CPI rose slightly in March.
The GBP/USD pair will also react to Fed’s minutes scheduled for Wednesday. These minutes will provide more information about what the committee deliberated in its March meeting.
GBP/USD forecast
The 4H chart shows that the GBP/USD pair made a bearish breakout last week. It managed to drop below the lower side of the rising wedge pattern. In most cases, this pattern is usually a bearish sign. It also moved below the 25-period and 50-period moving averages. The Relative Strength Index (RSI) has dropped below the neutral point of 50. Further, the MACD has moved below the zero line.
Therefore, the pair will likely continue falling as sellers target the next key support level at 1.2268, the highest level on February 14.
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