Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.3145.
- Add a stop-loss at 1.3400.
- Timeline: 1-2 days.
Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.3400.
- Add a stop-loss at 1.3145.
The GBP/USD exchange rate remained under pressure as traders focused on the upcoming Bank of England (BoE) interest rate decision. It was trading at 1.3277 on Tuesday, down from the year-to-date high of 1.3790. It remains a few pips above last week’s low of 1.3145.
Bank of England Interest Rate Decisions
The GBP/USD pair has sold off in the past few weeks as the recent sterling bull run lost steam. It is reacting to several macro events, such as the recent US nonfarm payrolls (NFP) data.
A report by the Bureau of Labor Statistics (BLS) showed that the economy created just 73,000 jobs, while the unemployment rate rose slightly to 4.2%, a sign that the US economy was slowing.
The GBP/USD pair has also fluctuated due to the ongoing trade issues. In multiple statements last week, Donald Trump announced a series of tariffs against top trading partners like South Korea and India. He also added India tariffs, citing its continued purchase of Russian energy.
There will be no major economic data from the United States this week. Therefore, traders will focus on the upcoming Bank of England (BoE) interest rate decision on Thursday.
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Market participants expect the bank to cut interest rates even as the country’s inflation rate remains much higher than in the US and the European Union. The most recent data showed that inflation jumped to 3.6%, while inflation expectations have continued rising.
Therefore, the decision to cut interest rates will likely not be unanimous, with some officials favoring leaving rates unchanged.
GBP/USD Technical Analysis
The daily chart shows that the GBP/USD exchange rate has been in a strong bearish trend in the past few weeks. It moved from a high of 1.3790 to the current 1.3276, a few points above this month’s low of 1.3145.
The pair has moved below the 50-day and 100-day Exponential Moving Averages (EMA). It has formed a head-and-shoulders pattern, a popular bearish continuation pattern.
Therefore, the most likely scenario is where it resumes the downtrend, with the next point to watch being at 1.3145. A move below that support level will point to more downside, potentially to the psychological point at 1.300. A move above the resistance level at 1.3400 will point to more gains.
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