Bearish view
Sell the GBP/USD pair and set a take-profit at 1.3100.
Add a stop-loss at 1.3300.
Timeline: 1-2 days.
Bullish view
Sell the GBP/USD pair and set a take-profit at 1.3300.
Add a stop-loss at 1.3100.
The GBP/USD pair has sold off in the past few weeks as traders assess the impact of the ongoing war on the economy. The pair dropped to 1.3260 on Monday, down sharply from the year-to-date high of 1.3870.
US Consumer Confidence Report Ahead
The GBP/USD pair has pulled back in the past few weeks as the Iran war has escalated, leading to a higher inflation in the UK and the US. It has pushed crude oil prices from below $60 earlier this year to over $110 today.
More data shows that the UK gas prices have jumped by 85% this year and 20% in the last 30 days. Other energy prices like coal, heating oil, and ethanol prices have all jumped in this period.
At the same time, fertilizer and air travel prices have continued rising in the past few weeks, a trend that will continue as the war gains steam.
The GBP/USD pair has also continued falling as traders wait for the upcoming US consumer confidence report, which will come out on Tuesday this week.
This report will show that confidence tumbled in March as inflation jumped and the labor market struggled. US inflation is expected to jump to over 4% this year, while the labor market has stagnated, with the economy losing over 92k jobs.
The US will publish the latest jobs numbers this week, with the JOLTs jobs report coming out on Tuesday this week and the non-farm payrolls (NFP) coming out on Friday. Economists see the data showing that the unemployment rate rose to 4.5% in March.
The main UK data to watch this week will be the upcoming mortgage and consumer lending report. Economists expect the data to show that mortgage lending rose to £4.4 billion, with mortgage approvals rising to 59.5k.
GBP/USD Technical Analysis
The daily timeframe chart shows that the GBP/USD pair has slipped in the past few weeks, falling from a high of 1.3870 in January to the current 1.3260.
The pair has dropped below the key resistance level at 1.3473, its highest point this month. It has also remained below the 50-day and 100-day Exponential Moving Averages (EMA).
The pair is hovering slightly above the ascending trendline, which connects the lowest swings since November last year.
Therefore, the pair will likely continue falling as the US dollar index continues rising. If this happens, the next key target will be at 1.3100.