Bearish View
- Sell the GBP/USD and set a take-profit at 1.3344.
- Add a stop-loss at 1.3600.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 1.3550 and a take-profit at 1.3650.
- Add a stop-loss at 1.3450.
The GBP/USD pair retreated in the overnight session as traders waited for the upcoming UK jobs and inflation numbers scheduled for Tuesday and Wednesday. The pair is trading at 1.3520, which was about 0.92% below the highest point last week.
UK Jobs Data
The main reason why the GBP/USD pair retreated is that demand for the US dollar jumped as investors rushed to safe-havens. Investors are afraid about the impact of a Russian invasion of Ukraine and the likely implications.
The US continues to believe that Russia has the troops and equipment that it needs to carry out an invasion. It believes that this invasion will take place before the Winter Olympics ends.
The impact of this invasion on the UK economy will be great because of natural gas. With many UK energy companies going out of business, the impact will worsen if gas prices soar.
The next key catalyst for the GBP/USD pair will be the upcoming US economic data. Economists polled by Reuters expect the data to show that the country’s unemployment rate declined from 4.1% to 4.0% in December.
The most important number will be wages, which the Bank of England is focusing on as it changes its monetary policy. Analysts expect the data to show that the average wage minus bonuses declined from 3.8% to 3.6%. With bonuses included, analysts expect the data to show that wages slowed down from 4.2% to 3.8%.
These numbers will come a day ahead of the UK inflation numbers. Economists expect the data to reveal that the headline inflation rose to 5.4% in January while core CPI rose to 4.3%.
The data will come almost two weeks after the Bank of England (BOE) published its interest rate decision. The bank caught investors off-guard by hiking interest rates for the second straight month.
GBP/USD Forecast
The four-hour chart shows that the GBP/USD pair has been in a strong bearish trend in the past few days. The pair moved to the 38.2% Fibonacci retracement level. It has moved slightly below the 25-day and 50-day moving averages while the MACD has moved below the neutral level.
A closer look shows that the coin has formed a double-top pattern whose chin is at 1.3490. Therefore, there is a likelihood that the pair will drop to the next key support at 1.3344.
