Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.3000.
- Add a stop-loss at 1.3150.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.3100 and a take-profit at 1.3200.
- Add a stop-loss at 1.3000.
The GBP/USD exchange rate retreated for the second consecutive day as the US dollar index (DXY) rebounded. It dropped to 1.3080, its lowest level in almost three weeks, and 1.425 below its highest point this year ahead of key economic numbers from the UK and the US.
US and UK data ahead
The GBP/USD pair dropped ahead of the upcoming UK jobs numbers set for Tuesday morning. Economists expect the data to show that the headline Consumer Price Index (CPI) fell from 4.2% in June to 4.1% in July. The median estimate is that the country’s average earnings rose by 4.1% while the number of claimant count retreated from 135k to 95.5k in August.
The UK labor market has been relatively strong this year and is doing better than what most analysts were expecting. The other key data to watch will come out on Wednesday when the UK releases the latest GDP data, which will provide more information about the state of the economy.
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Meanwhile, the GBP/USD pair retreated ahead of the important US consumer inflation data on Wednesday. Economists expect the data to show that the headline consumer price index (CPI) retreated from 2.9% in July to 2.6% in August. Core inflation, which excludes the volatile food and energy prices, is expected to retreat from 3.2% to 3.0%.
These numbers will likely confirm the view that the Federal Reserve will start cutting interest rates in its next meeting. The CME Fed Monitor tool estimates that the bank will slash rates by 0.25% later this month.
The Bank of England is also expected to slash interest rates for the second time when it meets on September 19.
GBP/USD technical analysis
The GBP/USD exchange rate peaked at 1.3262 last week and then pulled back to 1.3076 ahead of the upcoming UK jobs and GDP data. On the daily chart, the two lines of the MACD have formed a bearish crossover pattern.
The Relative Strength Index (RSI) has also pointed downwards and is nearing the neutral point at 50. The pair also remains above the 50-day Exponential Moving Average (EMA).
Therefore, the pair will likely retest the key support at 1.3045, its highest swing on July 17, and then resume the upward trend. A break below that support will point to more downside, with the next reference point being at 1.3000.
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