Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.3590.
- 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 1.3590.
The GBP/USD exchange rate retreated and retested the crucial support level at 1.3430 as trade concerns escalated. It dropped from last month’s high of 1.3592 as traders focus on more trade news.
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Trade Concerns Remain
The GBP/USD pair had a strong performance in May, jumping to the highest point since 2022. This rally happened as the US dollar dropped, with the closely-watched dollar index falling to $98.5, the lowest level in months.
The pair retreated on Friday as trade concerns remained. A US court allowed Donald Trump’s tariffs to continue ahead of the final ruling. This happened after a separate court ruled that these tariffs were illegal.
The administration has vowed to appeal move all the way to the Supreme Court to fight the ruling. It is also considering using other laws to enforce tariffs, which Trump believes are necessary to reduce the surging deficit.
The GBP/USD pair retreated after Trump announced that he would apply a 50% tariff on imported steel and aluminum, as he makes the case for US Steel’s buyout. It is unclear whether these tariffs will apply to UK steel since the two countries reached a deal in May.
The GBP/USD pair will react to the US manufacturing PMI data by the Institute of Supply Management (ISM). Economists expect the data to show that the PMI figure fell to 48.7. Another PMI figure by S&P Global is expected to show that the manufacturing PMI rose from 50.2 in April to 52.3 in May.
The other key data will be from the UK, where the Nationwide Society will publish the latest housing prices data. UK house prices have been a bit resilient
GBP/USD technical analysis
The GBP/USD pair peaked at 1.3592 in May, its highest point since 2022. It rose above the important resistance level at 1.3430, the upper side of the cup-and-handle pattern. This is a popular pattern comprising of a rounded bottom and some consolidation at the top. A C&H is one of the most bullish patterns in technical analysis.
The pair has retested the support at 1.3430, the upper side of the pattern. A break-and-retest is one of the most bullish continuation patterns. Therefore, the pair will likely bounce back and reach a high of 1.3592, its highest point this year. A drop below the support at 1.3400 will invalidate the bullish view.
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