Bullish view
Buy the GBP/USD pair and set a take-profit at 1.3625.
Add a stop-loss at 1.3400.
Timeline: 1-2 days.
Bearish view
Sell the GBP/USD pair and set a take-profit at 1.3400.
Add a stop-loss at 1.3600.
The GBP/USD exchange rate rebounded on Friday after reports emerged that the Iranian Foreign Minister was traveling to Pakistan, possibly to meet with the US. It was trading at 1.3530 on Monday as investors waited for the upcoming Bank of England (BoE) and Federal Reserve interest rate decisions.
Federal Reserve and Bank of England Decisions
The GBP/USD pair will be in the spotlight as odds that talks between the US and Iran happening fell. While Donald Trump has been enthusiastic about the second round of talks, Iranians have largely avoided them.
Therefore, crude oil prices may resume the uptrend as the Strait to Hormuz remains closed by Iran and the US. The Strait of Hormuz accounts for 20% of all crude oil shipments, and Iran may shut down the Red Sea if the war continues.
The GBP/USD pair will next react to the upcoming US macro data, including the consumer confidence, first quarter GDP report, housing starts, and building permits. These numbers will provide more information about the state of the US economy, especially as the war continues.
Most importantly, the Federal Reserve and the Bank of England (BoE) will deliver their interest rate decisions this year. Economists expect the Federal Reserve to leave interest rates unchanged between 3.50% and 3.75%.
The pair will also react to the upcoming BoE interest rate unchanged as inflation remains steady. A report released last week showed that the economy grew by 3.3% in March as the crude oil and gas prices continued rising. Analysts believe that inflation will remain steady for the remainder of the year.
GBP/USD Technical Analysis
The daily timeframe chart shows that the GBP/USD pair has rebounded in the past few weeks, moving from a low of 1.3162 in March this year to the current 1.3530.
It has moved above the key support level at 1.3475, its highest point on March 10 and 23rd. It has also remained above the 50-day Exponential Moving Average (EMA).
On the positive side, the pair has formed an inverted head-and-shoulders pattern, which is a common bullish reversal sign in technical analysis. It has also moved above the Supertrend indicator.
Therefore, the pair will likely continue rising as bulls target this month's high of 1.3600. A move above that target will point to more gains in the near term. On the other hand, a drop below the support at 1.3500 will invalidate the bullish outlook.