Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.2300.
- Add a stop-loss at 1.2500.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.2480 and a take-profit at 1.2550.
- Add a stop-loss at 1.2400.
The GBP/USD pair was flat on Wednesday morning as the recent consolidation continued. Sterling was trading at 1.2420, where it has been at this week. In all, the pair is loitering near its lowest level since April after it peaked at 1.2677 in May.
UK house price data ahead
This week, the forex market has been muted mostly because of the light economic calendar. The only important data came on Monday when S&P Global published encouraging UK and US service PMI numbers. These numbers pointed to a K-shaped recovery where the services sector is doing well while the factory output is struggling.
There will be two important economic data on Wednesday. In the UK, Halifax will publish May’s house price numbers. Economists believe that the country’s house price index was unchanged in May, leading to a 0.9% year-on-year decline.
Last week, a similar report by the Nationwide Society showed that the country’s house price index dropped sharply in May as mortgage rates rose. Prices dropped by 3.7% in May, the biggest decline since 2009. They fell by 0.1% from May to April. In the past, the report by Halifax and Nationwide tend to differ.
The GBP/USD pair will also react mildly to the latest US trade numbers. Economists expect that the country’s trade deficit remained above $63 billion in April.
Broadly, traders are focusing on this month’s meetings by the Federal Reserve and the Bank of England. There is a likelihood that the two banks will take a divergence path this month. The Fed could decide to pause its rate hikes while the Bank of England is expected to hike rates by 0.25%.
GBP/USD technical analysis
The GBP/USD pair has moved sideways in the past few days. It remains at the lower side of the Andrews Pitchfork indicator and is slightly below the 23.6% Fibonacci Retracement level. The pair is also hovering near the 50-period moving average and May’s low of 1.2300. Further, the Stochastic Oscillator has moved slightly above the oversold level.
The pair will likely remain in a consolidation phase on Wednesday. Any big move will see the pair drop to last month’s low of 1.2300. A move below this price will see it drop to the 50% retracement level at 1.2242.
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