Bearish view
Sell the GBP/USD pair and set a take-profit at 1.3100.
Add a stop-loss at 1.3350.
Timeline: 1-2 days.
Bullish view
Buy the GBP/USD pair and set a take-profit at 1.3350.
Add a stop-loss at 1.3100.
The GBP/USD exchange rate wavered near its lowest level since December last year as geopolitical tensions rose. It was trading at 1.3240 on Tuesday, down sharply from the year-to-date high of 1.3865.
UK PMI and FOMC Minutes
The GBP/USD exchange rate wavered as traders focused on the ongoing negotiations between the US and Iran as Donald Trump’s deadline on bombing Iran's critical infrastructure nears.
These tensions eased modestly on Monday after reports emerged that the two sides were talking about a potential 45-day ceasefire. Such a move would prevent an escalation, which would lead to higher crude oil prices, with Brent and West Texas Intermediate (WTI) rising to $110 and $112.
The GBP/USD pair will react to the upcoming UK composite and services PMI report, which will provide more color on the country’s economy. Economists expect the report to show that the services PMI dropped from 53.9 in February to 51.2 in March.
The composite PMI dropped from 53.7 to 51, a weakness that may continue as the impact of the war spreads. For example, the aviation industry is facing a challenge of the soaring jet fuel prices and shortages.
The GBP/USD pair will also react to the upcoming Federal Reserve minutes on Wednesday. These minutes will provide more information about the last meeting and what officials deliberated on.
The Fed left interest rates unchanged between 3.50% and 3.75% in the last meeting, and analysts expect that the bank will maintain rates unchanged. Recent data showed that the US economy added over 178k jobs in March, while the unemployment rate improved to 4.3%.
The US will publish the latest consumer inflation report on Friday, with analysts expecting the report to show that the headline CPI rose to 3.4% in March from the previous 2.4%.
GBP/USD Technical Analysis
The daily chart shows that the GBP/USD pair has been in a strong downward trend in the past few months, falling from a high of 1.3874 in January to the current 1.3238. It has formed a descending channel and moved below the 50-day Exponential Moving Average (EMA).
The pair has moved to the Ultimate Support level of the Murrey Math Lines tool. Also, it dropped below the Supertrend indicator, a sign that bears remain in control.
Therefore, the pair will likely continue falling as sellers target the next key target the key support level at 1.3100. A move above the Weak, Stop & Reverse level at 1.3300 will invalidate the bearish outlook.