Bearish view
Sell the GBP/USD pair and set a take-profit at 1.3350.
Add a stop-loss at 1.3475.
Timeline: 1-2 days.
Bullish view
Buy the GBP/USD pair and set a take-profit at 1.3475.
Add a stop-loss at 1.3350.
The GBP/USD pair wavered as traders reacted to the latest developments in the United States, where President Donald Trump is working on a deal to reopen the Strait of Hormuz. It was trading at 1.3430 on Monday morning, higher than this month’s low of 1.3300.
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UK and US Holidays as Focus Remain on US-Iran Talks
The GBP/USD pair will likely experience low volume today, May 25, as the UK will have a bank holiday. US markets will be closed for the Memorial Day weekend.
Still, the pair will react to any new developments on the Iran crisis, where the two countries are holding talks. In a weekend where most traders expected Trump to launch an attack, he caught many of them by surprise by saying that the two sides had reached an agreement to reopen the Strait of Hormuz.
As a result, crude oil prices dropped sharply on Monday, raising hopes that inflation will start falling in the US and the UK. Such a move will lower the possibility that the Federal Reserve will hike interest rates.
In a statement on Friday, Christopher Waller, one of the most dovish Fed officials, warned that he may support a rate hike if inflation remained at an elevated level. This statement came after minutes of the last meeting showed that some officials were supportive of rate hikes.
The next important macro data to watch will come from the United States, where the Conference Board will publish the latest consumer confidence report. Economists expect the report to reveal that confidence dropped sharply in May amid elevated inflation.
The US will also publish the latest house price index data on Tuesday followed by the latest GDP and PCE reports on Thursday. These numbers are important because the Fed focuses on them when making interest rate decisions.
GBP/USD Technical Analysis
The daily chart shows that the GBP/USD pair has rebounded in the past few days. This rebound happened after the UK published key macro data like inflation, retail sales, and jobs.
It was trading at 1.3430 on Monday, up from this month’s low of 1.3300. It has moved to the 50% Fibonacci Retracement level and is attempting to move above the key resistance level at 1.3453, its lowest point on April 23. It remains below the 50-day and 25-day moving averages.
Therefore, the pair will likely remain under pressure in the near term as bears attempt to retest the key support at 1.3350. A move above the resistance at 1.3470 will invalidate the bearish outlook.