Bearish view
- Go short the GBP/USD pair and set a take-profit at 1.2536 (June 2nd high).
- Add a stop-loss at 1.2710.
- Timeline: 1 day.
Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.2740.
- Add a stop-loss at 1.2570.
The GBP/USD price continued its downward spiral as the US dollar index (DXY) jumped by more than 40 basis points. The pair retreated to the June 15th low of 1.2600, which was much lower than last week’s high of 1.2850. As it dropped, the dollar index rose to $102.60 after a hawkish statement by Jerome Powell.
One of the biggest news this week was the Thames Water crisis in the UK. The company, which is the biggest water utility company in the country, is on the verge of collapse. It has over 10 billion of pounds, which it is struggling to pay back. A temporary measure being proposed is to nationalise the company as the government works to find a solution. It is not clear how the Thames Water crisis will affect the British economy.
The GBP/USD slipped after the latest statements by Jerome Powell and Andrew Bailey at the ECB summit in Portugal. In his statement, Powell insisted that the bank had more room to hike rates. He believes that the bank will hike by at least 50 basis points this year.
In his statement, Bailey noted that the British headline inflation was slipping but cautioned that core CPI was proving stickier. He hinted that the rising wage growth will likely see it rising interest rates several times this year.
The GBP/USD will have numerous catalysts on Thursday. In the UK, the Bank of England will publish the latest mortgage lending data. These are important leading indicators for the health of the housing market.
In the US, the statistics agency will publish the final reading of the first-quarter GDP data. Since this is the third and final reading, the impact on the US dollar will be limited.
GBP/USD technical analysis
The GBP/USD exchange rate continued its descent as the US dollar index jumped. As it dropped, the pair moved below the important support level at 1.2680, the highest point on May 10th. This price was also the upper side of the cup and handle pattern.
It has now dropped below the Ichimoku cloud and is at the lower side of the Bollinger Bands indicator. The MACD moved below the neutral point. Therefore, the outlook of the pair is still bearish, with the next support level being at 1.2536, the highest point on June 2nd.
Ready to trade our free daily Forex trading signals? We’ve shortlisted the best UK forex broker in the industry for you.