Bearish View
Sell the GBP/USD and add a take-profit at 1.3095.
Add a stop-loss at 1.3250.
Timeline: 1-2 days.
Bullish View
Set a buy-stop at 1.3265 and a take-profit at 1.3350.
Add a stop-loss at 1.3200.
The GBP/USD pair crashed to the lowest level in more than a year as the number of Covid-19 rose in the UK and as investors braced for strong US inflation numbers. The pair declined to a low of 1.3160, which was the lowest level since November last year.
New UK Covid-19 Rules
The UK has seen a significant number of new Covid-19 cases in the past few weeks. These cases are mostly among the vaccinated and the unvaccinated people in the country. Also, most of the patients are suffering the Delta variant while a growing number of them are having the Omicron variant.
Therefore, there are signs that the UK will move to more restrictions in the coming weeks to curb the spread of the virus. Media reports said that Boris Johnson will announce a move to Plan B measures. These measures will include vaccine passports and an order for most people to work from home.
As such, investors believe that these restrictions will disrupt the strong recovery of the UK economy. Most importantly, they believe that the Bank of England (BOE) will sound a bit dovish when it meets next week. Before the new outbreak, most analysts were expecting that the bank will sound a bit hawkish. Indeed, some were expecting that the bank will signal that it will hike interest rates in the coming months.
Later today, the GBP/USD will also react to the latest initial jobless claims numbers. Economists expect the data will show that the number of claims dropped from 222k to 215k last week. This is the same range that the number was before the Covid-19 pandemic.
On Friday, the UK will publish the latest GDP numbers while the US will release inflation numbers. The latter will be the key movers for the pair since they will have an impact on next week’s Federal Reserve decision.
GBP/USD Forecast
The four-hour chart shows that the GBP/USD pair has been in a strong bearish trend in the past few weeks. The pair declined to a low of 1.3168, which was along the first support of the standard pivot points.
The bearish trend is also being supported by the 25-day and 50-day moving averages (MA). It is also below the descending trendline that is shown in black.
Therefore, the pair will likely continue the downward trend as bears target the second support of 1.3095.
