Bearish view
Sell the GBP/USD pair and set a take-profit at 1.3400.
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 1.3400.
The GBP/USD exchange rate was flat on Monday as traders positioned themselves for a week where geopolitics and US jobs numbers will take center stage. It was trading at 1.3456, a few points above last week’s low of 1.3363.
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US Jobs and Geopolitics to be in Focus
The GBP/USD pair wavered last week as investors reacted to the potential deal between the US and Iran. Hopes of a deal pushed crude oil prices lower, with Brent, the global benchmark, falling to $91, its lowest point since April 17.
The falling crude oil prices has had a major impact on the financial market, with US bond yields continuing their downward trend. For example, the ten-year yield dropped to 4.437% from last month’s high of 4.686%.
Traders will continue to focus on any new developments on the US-Iran situation today. Besides, there are no major market moving data from the US and the UK on Monday. The main data to watch will be the UK house price index report by Nationwide. Economists expect this report to show that house prices rose 3% in May this year.
The other key data to watch will be the US ISM manufacturing PMI report, which is expected to show that activity maintained its robustness in May. The average estimate is that it slipped a bit to 52.7 from the previous month’s 53. A PMI reading of 50 and above is a sign that the sector is still expanding despite the rising cost of doing business.
The main macro data to watch this week will be the US jobs report. ADP will publish the private payrolls report on Wednesday followed by the official report on Friday. Economists expect this report to show that the unemployment rate remained at 4.3% as the economy added 96k jobs.
GBP/USD Technical Analysis
The daily chart shows that the GBP/USD pair has crawled back in the past few days, moving from last month’s low of 1.3300 to the current 1.3455. It is stuck along the 50-day Exponential Moving Average (EMA).
A closer look shows that it has formed a bearish flag pattern, a common continuation sign. This pattern is made up of a vertical line and an ascending channel, and it often leads to more downside.
Therefore, the path of the least resistance is bearish, with the next key target being last month’s low of 1.3300. However, a move above the key resistance at 1.3515 will invalidate the bearish outlook.
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