Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.2030.
- Add a stop-loss at 1.2225.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.2130 and a take-profit at 1.2220.
- Add a stop-loss at 1.2030.
The GBP/USD pair continued its downtrend as the US dollar continued its comeback. The pair retreated to a low of 1.2118 as the US dollar index (DXY) surged to $106.32. It has fallen by more than 1.45% from the highest point this week.
US GDP data ahead
The GBP/USD pair continued falling as investors embraced a risk-off sentiment. This view happened as American stocks continued falling, with the Dow Jones and the Nasdaq 100 indices slipped by more than 0.50%.
At the same time, the price of crude oil remained under pressure. The West Texas Intermediate (WTI) and Brent dropped to $85.50 and 90.30. Further, American bond yields continued rising. The 10-year yield rose to 4.95% while the 30-year rose to 5.08%.
These numbers came after the relatively strong economic data. Economic data showed that the number of new home sales rose from 676k in August to 759k in September. Additional data revealed that the manufacturing and services PMIs rose above 50 in October.
Therefore, there is a likelihood that the Federal Reserve will decide to hike interest rates in its meeting next week. The next key data to watch will be from the United States. First, the US will publish the latest durable goods orders.
Economists polled by Reuters expect the data to reveal that core durable goods rose by 0.2% in September while the headline figure jumped by 2.2%. These are important numbers because they show how the economy is performing.
The most important data will be the first estimate of the country’s third-quarter GDP data. Economists expect the data to show that the economy expanded by over 4% in Q3. Those at Goldman Sachs sees it growing by 4.7%.
GBP/USD technical analysis
The GBP/USD continued its downward trend in the overnight session. As it dropped, the pair moved below the key support at 1.2270, the highest swing in October. It has moved below the 50-period moving average. Most importantly, the pair retested the ascending trendline that connects the lowest point since October 4th.
The pair has formed what looks like a double-top pattern. Therefore, the pair will likely continue falling as sellers target the key support at 1.2030, the lowest swing on October 4th. The stop-loss of this trade is at 1.2225.
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