Bearish View
- Sell the GBP/USD pair and set a take-profit at 1.1900.
- Add a stop-loss at 1.2140.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 1.2085 and a take-profit at 1.2150.
- Add a stop-loss at 1.2000.
The GBP/USD exchange rate continued wavering on Tuesday morning ahead of the official reopening of the American and UK financial market. It was trading at 1.2050, where it has been in the past few days. This price is about 3.25% below the highest point in December.
UK PMIs and FOMC Minutes
The GBP/USD price remained under pressure as concerns about the state of the British economy remained. Recent data showed that the economy moved into a recession in the fourth quarter as it faced significant challenges.
House prices have dropped while the retail sector is reeling. Data showed that the number of retail store closures jumped to a record high in 2022. Inflation remains close to its highest level in more than four decades.
Therefore, there are concerns about how high the Bank of England (BoE) will hike interest rates in 2023. It has already hiked in all its meetings since December 2021. The next key data to watch from the UK will be the manufacturing PMI data. Economists expect the data to show that the PMI dropped from 46.5 to 44.7 in December.
The other catalyst for the GBP/USD price will be the upcoming minutes of the Federal Open Market Committee (FOMC). The minutes, scheduled for Wednesday, will provide more color about the deliberations made by Fed officials.
In that meeting, the Fed decided to hike interest rates by 0.50%, bringing the deposit rate to 4.50%. The accompanying statement hinted that it will continue hiking in the coming meetings. Analysts now expect that the bank will hike by 0.50% in February followed by 0.25% in March.
The pair will also react to the latest non-farm payrolls (NFP) data scheduled on Friday. These numbers are expected to show that the economy created over 200k jobs in December.
GBP/USD Forecast
The GBP/USD pair has been in a consolidation phase at the 1.200 level in the past few days. It has moved to the 25-day moving average and is slightly above the first support of the Woodie pivot point. Bollinger Bands have narrowed. It is also below the ascending channel shown in yellow.
The Relative Strength Index (RSI) has continued rising and is above the ascending trendline. Therefore, the pair will likely remain in this range on Tuesday. The key levels to watch will be at 1.1900 and 1.2150.
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