- Sell the GBP/USD pair and set a take-profit at 1.2238 (50% retracement).
- Add a stop-loss at 1.2525.
- Timeline: 1-3 days.
- Set a buy-stop at 1.2485 and a take-profit at 1.2550.
- Add a stop-loss at 1.2385.
The GBP/USD exchange rate was unchanged as traders waited for key statements and economic data from the UK and the US. It also recoiled after the latest talks between Joe Biden and Kevin McCarthy on the debt limit issue. The pair was trading at 1.2432, a few pips below last Friday’s high of 1.2480.
Economic data and Bailey's statement
The forex market is relatively calm this week as the countdown to June 1 continues. In previous statements, Janet Yellen, the head of the Treasury warned that the US government could run out of cash if Congress failed to pass the debt limit deal.
President Joe Biden and Speaker Kevin McCarthy met on Monday and committed to not default. But divisions between the two parties remain substantially wide. While the two sides will likely reach an agreement later this month, the path to a deal will be long and difficult. It could also lead to more volatility in the market.
There are several important events in the economic calendar on Tuesday. S&P Global will publish the important flash manufacturing and services PMI numbers from the UK and the US. These numbers will provide more information on the state of the two economies.
Economists expect the numbers to reveal that the services sector continued to outperform the manufacturing industry. In the two countries, manufacturing PMIs are expected to remain in a contraction area.
The GBP/USD pair will also react to a statement by Andrew Bailey, the head of the Bank of England (BoE) head. In it, he will likely talk about the state of the British economy and what to expect in the coming meetings. The BoE decided to hike interest rates by 0.25% in its meeting this month.
Meanwhile, in the United States, the statistics agency will publish the latest new home sales numbers while Fed official Lorie Logan will speak. In a statement last week, she supported smaller and less frequent rate hikes.
GBP/USD technical analysis
The GBP/USD pair has been in a bearish trend after peaking at 1.2675 on May 11. It has dropped below the 23.6% Fibonacci Retracement level. The pair has moved below the 50-period exponential moving average. Most importantly, the pair has moved below the lower side of the ascending channel shown in purple. The MACD has moved below the neutral point.
Therefore, the pair will likely continue falling as sellers target the 50% retracement level at 1.2238. The stop-loss of this trade is at 1.2525.