Bearish View
- Sell the GBP/USD and set a take-profit at 1.3320.
- Add a stop-loss at 1.3500.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 1.3430 and a take-profit at 1.3500.
- Add a stop-loss at 1.3370.
The GBP/USD price sell-off accelerated after the relatively weak UK and US manufacturing and services PMI data. The pair declined to a low of 1.3450, which was the lowest level since January 3rd. It has fallen by over 2.25% below the highest level in January.
US Consumer Confidence Data
The GBP/USD pair declined sharply after the latest data by Markit showed the impact of the latest Omicron variant.
The numbers showed that the UK manufacturing PMI declined from 57.9 in December to 56.9 in January. This decline was lower than the median estimate of 57.7.
The same trend happened in the services sector. The services PMI declined from 53.1 to 51.2, which was the lowest level since 52.2. As a result, the composite PMI declined to 53.4.
Meanwhile, the manufacturing and services sectors deteriorated in the United States. The two PMIs declined to 55.0 and 50.9, respectively. The numbers were weaker than the median estimate of 56.7 and 55.0, respectively.
Still, there is a likelihood that the pair will start improving. For one, the UK has moved away from Plan B measures to contain the Omicron variant. In the US, Anthony Fauci has said that the Omicron variant may have peaked in the US.
Later today, the GBP/USD pair will react to the latest American consumer confidence data. The data is expected to show that confidence declined to 111.8 in January from 115.8 in the previous month. This decline will likely be because of the rising consumer inflation.
The pair will also react to the latest Federal Reserve interest rate decision that will come out on Wednesday. Analysts expect that the bank will slash its quantitative easing policy again and hint about rate hikes.
GBP/USD Forecast
The GBP/USD pair has been in a sharp downward trend in the past few weeks. Along the way, the pair has moved below the 50% Fibonacci retracement level. At the same time, the pair has moved below the 25-period and 50-period exponential moving averages (EMA). The Stochastic oscillator and the Relative Strength Index (RSI) have been falling. The price is along the lower side of the Bollinger Bands.
Therefore, the pair will likely keep falling as bears target the 23.6% Fibonacci retracement level at 1.3320.
