Bearish view
Sell the GBP/USD pair and set a take-profit at 1.3300.
Add a stop-loss at 1.3550.
Timeline: 1-2 days.
Bullish view
Buy the GBP/USD pair and set a take-profit at 1.3550.
Add a stop-loss at 1.3300.
The GBP/USD exchange rate wavered as investors watched the new developments in Iran, where fighting continued. It also wavered ahead of the upcoming US consumer inflation report that comes later today. It was trading at 1.3430, up slightly from this month's low of 1.3248.
US Consumer Inflation Data Ahead
The GBP/USD exchange rate held steady as investors continued to watch the ongoing war in Iran, where hundreds are being killed.
Donald Trump has hinted that his war was ahead of schedule, and that he wants it to conclude soon, which explains why crude oil prices have retreated from over $115 on Monday to below $90. In a statement, the Energy Information Administration (EIA) proposed a gradual increase in the release of strategic oil reserves.
The next key catalyst for the pair will come out later today when the US releases the latest US consumer inflation report.
Economists polled by Reuters expect the data to show that the headline Consumer Price Index (CPI) rose from 0.2% in January to 0.30% in February. They expect the figure to rise 2.4%, slightly higher than the Federal Reserve’s target of 2.0%.
Core inflation, which excludes the volatile food and energy prices, is expected to remain at 2.5%. However, inflation will likely remain at an elevated level for a while because of the ongoing war.
Therefore, the Federal Reserve will likely maintain a hawkish tone in the near term as it battles with an economy going through a stagflation, a situation where inflation rises and economic growth stalls. A report released on Friday showed that the economy shed over 92,000 jobs in February this year.
GBP/USD Technical Analysis
The daily timeframe chart shows that the GBP/USD exchange rate has slumped in the past few weeks, moving from a high of 1.3866 in January to the current 1.3430.
Its recent rebound found a substantial resistance level at the 50-day Exponential Moving Average (EMA). The pair has also remained below the Supertrend indicator, a sign that the bearish trend continues.
The pair has formed a small evening star candlestick pattern, a common bearish reversal sign in technical analysis.
Therefore, the most likely scenario is where the pair resumes the downtrend, potentially to this month's low of 1.3255. On the flip side, a move above the key resistance level at 1.3600 will invalidate the bearish outlook.