GBP/USD : The Bullish View
Buy the GBP/USD currency pair, set the take-profit target at 1.2650, establish a stop-loss at 1.2450, and aim for a timeline of 1-2 days.
GBP/USD : The Bearish View
Place a sell-stop order at 1.2510, a take-profit order at 1.2450, and a stop-loss order at 1.2650.
The GBP/USD pair remained steady following the release of the latest US consumer confidence report from the Conference Board and the recent UK GDP Reports. The cable was trading at 1.2530 as the Christmas holiday approached.
US Consumer Confidence and UK GDP Reports
The GBP/USD exchange rate has been on a steady decline, reflecting the growing disparity between the UK and the United States.
Recent data released on Monday showed that the British economy stagnated in the third quarter, remaining unchanged from the previous quarter and growing by 0.9% year-on-year. This was below the expected growth of 1.0% and the median estimate of 0.1%.
These figures came shortly after the Bank of England decided to hold interest rates steady, citing ongoing concerns over inflation.
In contrast, the US economy has been performing well, avoiding a recession. The economy grew by 3.1% in Q3 and is on track for a 2.5% year-on-year increase in 2024. If this projection holds, the US economy will have expanded by more than 12% since the pandemic downturn.
The GBP/USD pair also responded to the latest consumer confidence report. According to the Conference Board, consumer confidence fell from 112.8 in November to 104.7 in December, missing the forecast of 112.9.
Additional US data showed a decline in durable goods orders, which fell from 0.8% in October to -1.1% in November.
Despite these reports, the GBP/USD pair reacted modestly, as both the Federal Reserve and the Bank of England have already made their final decisions for the year. The Fed recently lowered interest rates by 0.25% and signaled two more potential cuts in 2024. The central bank is more focused on rising inflation, partly driven by President Trump’s increasing tariffs on key trading partners such as Canada and Mexico.
GBP/USD Technical Analysis
The GBP/USD exchange rate has declined significantly due to the economic divergence between the US and UK, coupled with the strength of the US dollar. It has fallen from a year-to-date peak of 1.3433 to a low of 1.2485, where it formed a double-bottom pattern.
The pair has dropped below both the 61.8% Fibonacci Retracement level and the 50-day moving average, and is currently positioned just above the first support level of the Woodie pivot point.
As a result, the GBP/USD pair could see a rebound driven by the double-bottom formation. Such a recovery would likely push the exchange rate towards the next key level at 1.2650.