Bearish View
Sell the GBP/USD pair and set a take-profit at 1.3300.
Add a stop-loss at 1.3600.
Timeline: 1-2 days.
Bullish view
Buy the GBP/USD pair and set a take-profit at 1.3600.
Add a stop-loss at 1.3300.
The GBP/USD pair retreated sharply as investors reacted to the latest developments in the Middle East and last week’s interest rate decisions by the Federal Reserve and Bank of England (BoE). It dropped to 1.3432 on Tuesday, down modestly from Monday’s high of 1.3506.
US and UK PMI Numbers Diverge
The GBP/USD pair retreated after the latest US and UK manufacturing PMI numbers pointed to a divergence. A report by S&P Global showed that the UK manufacturing PMI dropped from 52 in June to 51.9 in July, missing the expected 52.0.
On the other hand, in the United States, the report showed that the manufacturing PMI jumped to 53.9, higher than the expected 53.8. Another report by the Institute of Supply Management (ISM) showed that the figure jumped from 53.3 in June to 55.6 in July.
These numbers mean that the US manufacturing sector is doing well. This report came a few days after the Federal Reserve delivered its interest rate decision. It left interest rates unchanged between 3.50% and 3.75%. The Bank of England (BoE) also left interest rates unchanged at 3.75%.
The GBP/USD pair is also reacting the ongoing developments in the Middle East, where the US and Iran continued their pause. President Donald Trump recently paused his decapitating attacks against during the weekend. As a result, crude oil prices have dropped a bit, even as concerns about the war remains. For one, Iran has rejected any claims that it is in talks with the US. Instead, it has said that it was in talks with Oman on reopening the Strait of Hormuz.
There will be no major GBP/USD news today, with traders focusing on the upcoming US nonfarm payrolls (NFP) data.
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GBP/USD Technical Analysis
The weekly chart shows that the GBP/USD pair has remained in a narrow range in the past few months. It was trading at 1.3432 on Tuesday, slightly above the 50-week Exponential Moving Average (EMA).
The pair is slowly forming a symmetrical triangle pattern, whose two lines are nearing their confluence. The Average Directional Index (ADX) has continued falling and is at its lowest level since January.
Therefore, the pair will likely remain in this range in the next few days. The key levels to watch will be at 1.3300 and 1.3600.
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