GBP/USD Forex Signal: Drop to 1.200 Likely Ahead of BoE Decision

Crispus Nyaga

The pair will likely continue falling as sellers target the next key support at 1.200.

Bearish View

  • Sell the GBP/USD pair and set a take-profit at 1.2000.
  • Add a stop-loss at 1.2230.
  • Timeline: 1-2 days.

Bullish View

  • Set a buy-stop at 1.2200 and a take-profit at 1.2300.
  • Add a stop-loss at 1.2100.

The GBP/USD price remained under pressure during the Asian session as investors waited for the upcoming Bank of England (BoE) decision and US non-farm payrolls (NFP) data. It is trading at 1.2152, which is a few points below this week’s high of 1.2292.

BoE Interest Rate Decision

The Bank of England will conclude its two-day monetary policy meeting on Thursday. Economists, judging by recent words of Andrew Bailey, anticipate that the bank will hike interest rates by 0.5%. If the bank does this, it will be the biggest increase in more than 27 years.

The BoE has been one of the most hawkish central banks this year. It has hiked rates by 0.25% in all its meetings since December. Analyts believe that the rate hike will be balanced in nature since he bank is aiming to tighten without causing a recession. They also expect that rates will peak at about 3%.

The BoE decision comes a week after the IMF downgraded its outlook for the economy and inflation. As a result, the agency recommended that the BOE should take tough measures even if it hit growth, jobs and wages in the short-term.

UK’s economic data have been mixed. The labor market is strong while wage growth has continued well. On the other hand, consumer confidence has slipped to the lowest level in decades while inflation has surged to 9.4%, the highest point in over three decades.

Historically, currencies tend to rally after a central bank hikes rates. However, in this case, a retreat is also possible since the 50 basis points hike has already been priced in.

The next key data to watch will be the upcoming US jobs data scheduled for Friday. Analysts expect the data to show that the labor market continued slowing down.

GBP/USD Forecast

The four-hour chart shows that the GBP/USD pair has retreated sharply in the past few days. It dropped from a high of 1.2291 to a low of 1.2100. The current price is along the lower side of the ascending channel that is shown in green. It has also moved slightly below the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved below the neutral point at 50.

Therefore, the pair will likely continue falling as sellers target the next key support at 1.200. A move above the resistance at 1.2225 will invalidate the bearish view.

GBP/USD

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Crispus Nyaga
Crispus Nyaga is a financial analyst, coach, and trader with more than 8 years in the industry. He has worked for leading companies like ATFX, easyMarkets, and OctaFx. Further, he has published widely in platforms like SeekingAlpha, Investing Cube, Capital.com, and Invezz. In his free time, he likes watching golf and spending time with his wife and child.

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