Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.3250.
- Add a stop-loss at 1.3450.
- Timeline: 1-2 days.
Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.3450.
- Add a stop-loss at 1.3250.
The GBP/USD exchange rate continued falling after the relatively encouraging economic data from the United States. It has dropped in the last four consecutive days and is hovering at its lowest level since May 20th of this year.
Federal Reserve Interest Rate Decision
The GBP/USD pair retreated after the US released mixed data the day before the Federal Reserve's interest rate decision.
According to the Conference Board, U.S. consumer confidence jumped to 97.2 in July from 95.2 in the previous month. That increase was better than the median estimate of 95.8.
Another report by the Bureau of Labor Statistics (BLS) showed that the number of job openings dropped to 7.4 million in June, continuing to cool because of Donald Trump’s tariffs.
The next key catalyst for the GBP/USD pair will be the ADP private payrolls data. Economists expect the report to show that the private sector increased its workers by 78,000 this month after shedding 33,000 in June.
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The ADP report will come two days before the official nonfarm payrolls (NFP) data. These jobs numbers are important because they form part of the Federal Reserve’s dual mandate.
The GBP/USD pair will also react to the first estimate of second-quarter GDP data. Economists expect the data to show that the economy rebounded in Q2 as the import growth slowed.
The expectation is that the economy grew by 2.4% in the second quarter, following a 0.5% contraction in Q1. These numbers will come a few hours before the Federal Reserve delivers its interest rate decision.
Most analysts believe that the bank will not cut interest rates in this meeting as officials have hinted. The pair will primarily react to the bank’s guidance on when it will cut rates.
GBP/USD Technical Analysis
The daily chart shows that the GBP/USD exchange rate has been in a steep downward trend in the past few days. It has plunged from a high of 1.3790 earlier this month to 1.3355 today.
The pair has moved below the important support level at 1.3431, its highest point on September 26. It also moved below the 50-day Exponential Moving Averages (EMA) and formed a head-and-shoulders pattern, a common bearish continuation sign.
Therefore, the pair may keep falling as sellers target the next key support level at 1.3250. A move above the resistance at 1.3431 will invalidate the bearish forecast.
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