Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.2350.
- Add a stop-loss at 1.2500.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.2455 and a take-profit at 1.2520.
- Add a stop-loss at 1.2385.
The GBP/USD pair continued its strong downward trend ahead of the upcoming UK jobs and inflation numbers. The sell-off intensified after the US published strong jobs and CPI numbers, raising concerns about the next actions by the Federal Reserve. It dropped to a multi-month low of 1.2428 as the US dollar index surge continued.
Geopolitics and UK economic numbers
The biggest catalyst for the GBP/USD pair was the strong US inflation numbers. According to the Bureau of Labor Statistics (BLS), the US inflation jumped to 3.5% in March while the core CPI rose to 3.8%.
These numbers came a few days after the US published strong job numbers, which revealed that the economy created over 303k jobs as the jobless rate retreated to 3.8%. Therefore, most economists expect the Fed to maintain interest rates intact in its May and June meetings.
This is a major turn of events since most economists were expecting up to six rate cuts in 2024 as inflation retreated. Expectations of a more hawkish Fed explain why the US dollar index has risen to over $106, its highest level in months.
Looking ahead, the US will publish the latest retail sales numbers. Economists expect the numbers to show that the country’s sales were vibrant in March. The headline retail sales are expected to come in at 0.4% while the core sales are seen coming in at 0.5%.
A strong retail sales report will signal that the US economy is still strong even as inflation remains stubbornly high.
The other crucial GBP/USD news will come out on Tuesday when the Office of National Statistics (ONS) will publish the UK jobs numbers. It will then release the March inflation report, which is expected to show that prices retreated in March.
The pair will also be affected by the geopolitical events in the Middle East that have pushed oil prices to the highest point in months.
GBP/USD technical analysis
The GBP/USD pair continued its downward trend on Monday as traders embraced a risk-off sentiment. It has moved below the key support at 1.2520, its lowest swing on February 5th of this year.
The pair has also plunged below the second support of the Woodie pivot points and the 50-period Exponential Moving Average (EMA). Also, the Relative Vigor Index (RVI) has remained below the neutral line.
Therefore, the pair’s path of the least resistance is downwards. More downside will be confirmed if it crosses the third support of the Woodie pivot point at 1.2422 and the psychological point at 1.2400.
The alternative scenario is where the pair bounces back and retests the second Woodie resistance at 1.2480.
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