Bullish view
Buy the GBP/USD pair and set a take-profit at 1.3550.
Add a stop-loss at 1.3310.
Timeline: 1-2 days.
Bearish view
Sell the GBP/USD pair and set a take-profit at 1.3310.
Add a stop-loss at 1.3550.
The GBP/USD exchange rate retreated as market participants reacted to the new war in the Middle East and its impact on the economy. It dropped to 1.3310, its lowest level since December 10 last year.
Geopolitics and US Jobs Data in Focus
The GBP/USD pair has been in a strong downward trend in the past few weeks as the recent rally faded. It continued this week as a new war in the Middle East started with the US and Iran launching an attack against Iran.
The attack has had some major implications, with crude oil and natural gas prices soaring. Brent, the global benchmark, rose to $78, while the West Texas Intermediate hit $72. Natural gas jumped as Qatar closed a major plant after coming under attack from Iran.
The GBP/USD pair retreated as the US dollar index rebounded amid the ongoing risk-off sentiment in the market. Gold and other safe-haven assets like the Swiss franc continued rising this week.
The pair also retreated as market participants reacted to the latest PMI data, which showed that the US economy was doing well in February. A report by the Institute of Supply Management (ISM) showed that the PMI rose to 52.4, while a separate one by S&P Global came in at 51.6. These numbers mean that the country’s manufacturing sector is doing well.
The next important GBP/USD news will come from the United States, where ADP and the Bureau of Labor Statistics (BLS) will publish the latest jobs numbers. Economists expect the upcoming report by ADP to show that the private sector added 50k jobs in February.
The BLS will release its labor report on Friday, with economists expecting it to show that the economy added 70k jobs as the unemployment rate remained at 4.3%.
GBP/USD Technical Analysis
The daily timeframe chart shows that the GBP/USD pair crashed to 1.3310 on Monday as the US dollar rally continued. It dropped below the 50-day moving average, while the Relative Strength Index has dropped below the neutral point at 50.
The two lines of the MACD indicator made a bearish crossover and have now moved below the zero line.
On the positive side, it has formed a standard doji candlestick pattern, which is a common bullish reversal sign in technical analysis. Therefore, the pair will likely bounce back in the near term, potentially to the key resistance level at 1.3600. A drop below this week’s low of 1.3310 will point to more downside.