Bearish View
- Sell the GBP/USD and set a take-profit at 1.3360.
- Add a stop-loss at 1.3500.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 1.3435 and a take-profit at 1.3500.
- Add a stop-loss at 1.3350.
The GBP/USD pair wavered as investors continued to reflect on the report by Sue Gray on Downing Street parties. The pair is trading at 1.3425, which was slightly higher than last week’s low of 1.3355.
Sue Gray Report
The GBP/USD wavered in the overnight session after a report by a government watchdog criticized Boris Johnson’s administration. The report led to a significant amount of criticism from both Tories and the opposition party. Boris Johnson was also forced to issue an apology in parliament.
Still, analysts believe that the uproar on the parties will not have an immediate impact on the UK economy.
Looking ahead, the biggest catalyst for the GBP/USD pair this week will be the latest interest rate decision by the Bank of England (BOE) that is scheduled for Thursday this week.
Economists expect that the BOE will continue with its hiking cycle considering that the country’s economy is doing relatively well. Data published in January showed that the overall inflation rate has jumped to a multi-year high while the unemployment rate has dropped to the lowest level since the pandemic started.
Later today, the key catalysts for the pair will be the latest economic numbers from the UK and the US. For example, the Nationwide Society will deliver the latest home price index (HPI) data. Economists expect the data to show that the country’s home prices rose by 10.8% in January after rising by 10.4% in the previous month.
On a month-on-month basi, analysts believe that the HPI rose by 0.6%. The rising home prices will give the BOE an incentive to hike interest rates.
Markit will also publish the latest manufacturing PMI data from the US and the UK. Analysts expect that the manufacturing sector did well in January even as the supply chain disruptions continued.
GBP/USD Forecast
The four-hour chart shows that the GBP/USD pair found some resistance at the standard pivot point after the Sue Gray report. The pair is trading at 1.3425, which is slightly higher than the lowest point last week. It is also slightly below the 25-day and 50-day moving averages. The pair is also along the 38.2% Fibonacci retracement level.
Therefore, there is a likelihood that the pair will continue falling as bears target the next key support at 1.3360, which was along the lowest level last week.
