Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.2468.
- Add a stop-loss at 1.2600.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.2565 and a take-profit at 1.2635.
- Add a stop-loss at 1.2470.
The GBP/USD exchange rate was flat on Tuesday morning ahead of important events from the US and the UK. The pair was trading at 1.2550, a few points above last week’s low of 1.2502.
UK and US economic data ahead
The broader financial market was on edge on Monday and Tuesday morning ahead of key market events. In the US, key indices like the Dow Jones, Nasdaq 100, and S&P 500 rose by about 0.50% while the dollar index jumped by 15 basis points.
The main reason for this price action is that this will be the most important week in the financial market this month. The US will publish the November consumer inflation data on Tuesday.
Economists believe that inflation continued falling in November, helped by durable goods and energy prices. Gasoline prices have slumped to the lowest level in over two years while natural gas is down by double-digits this year.
These numbers will come a few days after the US released strong jobs data. The economy added over 190k jobs in November as the unemployment rate dropped to 3.7%. Wage growth continued rising during the month.
These numbers, which form part of the Fed’s dual mandate, will help the bank in its meeting. Economists expect the Fed will leave rates unchanged between 5.25% and 5.50% and push back against rate cut bets.
The other important GBP/USD news will be the upcoming UK jobs numbers. Economists expect these numbers to reveal that the jobless rate remained unchanged at 4.2% while wage growth held quite well.
Like the Fed, economists are anticipating that the BoE will maintain rates at the current level in its December meeting. In a note, analysts at Goldman Sachs expect the bank will start cutting in August next year.
GBP/USD technical analysis
The GBP/USD pair has drifted downwards in the past few weeks. It has formed a descending channel and retreated below the 50-period moving average. The pair has also dropped below the Ichimoku cloud indicator and the 23.6% Fibonacci Retracement level.
Also, the Relative Strength Index (RSI) has been in a downtrend. Therefore, the outlook for the GBP/USD exchange rate is bearish as long as it remains below the upper side of the descending channel.
If the downtrend holds, the next support level to watch will be the 38.2% retracement point at 1.2468.
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