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Bullish view
Buy the GBP/USD pair and set a take-profit at 1.3500.
Add a stop-loss at 1.3350.
Timeline: 1-2 days.
Bearish view
Sell the GBP/USD pair and set a take-profit at 1.3350.
Add a stop-loss at 1.3500.
The GBP/USD exchange rate was little changed on Monday as traders embraced a risk-on sentiment after the Iranian memorandum of understanding (MOU) and as they waited for the upcoming Bank of England (BoE) and Federal Reserve interest rate decisions. It was trading at the psychologically important level of 1.3400, higher than this month’s low of 1.3310.
Bank of England and Federal Reserve Decision Ahead
The GBP/USD pair held steady in which will be the busiest week of this month, with the Federal Reserve and BoE delivering their interest rate decisions and the statistics agencies in the respective countries publishing the latest macro data.
At the same time, the pair is reacting to the falling crude oil prices after the US and Iran reached an MoU on how to end the war. This MoU means that the Strait of Hormuz will now be open, a move that will flood the world with millions of barrels of oil.
The Federal Reserve will be the first central bank to deliver its interest rate decision. Economists expect the bank to leave interest rates unchanged between 3.50% and 3.75%.
The most important part of this meeting will be the press conference, where Kevin Warsh will make his debut. He will use this stage to answer questions and share his vision for the bank. Also, he will likely provide hints on whether the Fed will cut or hike interest rates this year.
Trump appointed Warsh to replace Jerome Powell, who had angered him by not cutting rates faster enough. Last year, Trump was arguing that the bank should slash rates by as much as 300 basis points.
The BoE will also leave interest rates unchanged and possibly warn that it will decide to hike later this year if inflation remained stubbornly high. In addition to these events, the US and UK will publish several important numbers like housing, industrial production, and retail sales.
GBP/USD Technical Analysis
The daily chart shows that the GBP/USD pair formed a double-bottom pattern at 1.3300 and a neckline at 1.3506. A double-bottom is one of the most common bullish reversal signs in technical analysis.
The pair is also hovering between the 50% and 38.2% Fibonacci Retracement level. It has also moved slightly above the 25-day moving average, while the Relative Strength Index is pointing upwards.
Therefore, the pair will likely continue rising in the coming days as investors target the key resistance level at 1.3500. A drop below the support level at 1.3350 will invalidate the bullish outlook.
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