Bearish View
- Sell the GBP/USD and set a take-profit at 1.2600.
- Add a stop-loss at 1.2650.
- Timeline: 1 day.
Bullish View
- Set a buy-stop at 1.2560 and a take-profit at 1.2650.
- Add a stop-loss at 1.2500.
The GBP/USD pair declined slightly as investors refocused on the important central bank decisions scheduled for today and Thursday. The British pound is trading at 1.1.2500, which is slightly below this week’s high of 1.2615.
BOE and Fed Decision
The Federal Open Market Committee (FOMC) will conclude its two-day meeting later on Wednesday. This will be a closely-watched meeting because of the state of the American economy. While inflation has surged, there are signs that economic growth has slowed dramatically.
Therefore, there is a possibility that the economy is going through a period of stagflation, which is usually one of the worst situations in the market.
Economists expect that the Federal Reserve will increase interest rates by about 0.50%, the biggest increase in years. There are also expectations that the Fed will start quantitative tightening policies, by reducing its balance sheet by about $75 billion.
The GBP/USD pair will also react to the coming interest rate decision by the Bank of England. With the UK economy slowing, expectations are for a dovish rate hike. In this, the bank will likely deliver its fourth hike and then hint that it will not hike rates again.
Recent data from the Office of the National Statistics (ONS) showed that retail sales declined sharply in March. Consumer confidence, which is an important gauge of spending, declined for the fifth straight month.
The pair will then react to the latest mortgage data from the UK that will come out later today. Analysts expect the data to show that mortgage approvals declined to 70.78k. The volume of lending is expected to have dropped to about 5.11 billion pounds.
Another important data will be the upcoming US jobs data. Numbers from ADP are expected to show that private employers slowed their hiring in April.
GBP/USD Forecast
The GBP/USD pair declined slightly to a low of 12500, which was lower than this week’s high of 1.2615. It moved slightly below the standard pivot point. It also moved below the 25-day moving average while the Relative Strength Index (RSI) has moved slightly below the neutral level at 50.
Therefore, the pair will likely continue falling as bears target the key support level at 1.2400. A move above the resistance at 1.2620 will invalidate the bearish view.
