The GBP/USD pair has experienced a recent rebound after hitting a multi-month low of 1.2353 last Thursday. This upward movement is partially attributed to a weaker US dollar, as investors await key US economic data and Federal Reserve (Fed) insights. Despite this, the overall downtrend for the pair remains intact.
Market Drivers
- Dollar Weakness: The US dollar index has seen a decline, supporting the GBP/USD rebound.
- Fed Commentary: While a Fed official, Lisa Cook, reiterated a hawkish stance, stating inflation is still a concern, the dollar softened.
- Upcoming Fed Minutes: Wednesday’s release of the Fed meeting minutes will be closely analyzed for further hints about future monetary policy. The last meeting saw a rate cut of 0.25% but a less dovish outlook for future cuts.
- US Jobs Data: This week’s US jobs numbers, including JOLTS job openings, ADP private payrolls, and the official BLS report, will be crucial in assessing the strength of the US labor market.
- UK Data: The only significant UK data this week is Tuesday’s house price index.
Technical Outlook
- Rebound from Key Level: The GBP/USD found support at 1.2355, coinciding with the 78.6% Fibonacci retracement level. It has since moved above a previous support level at 1.2488.
- Moving Average Resistance: The pair remains below all key moving averages, suggesting the current rebound might be temporary.
- Break and Retest Pattern: The recent price action resembles a “break and retest” pattern, a signal that the downtrend may resume soon.
Trading Recommendations
Bearish View:
- Sell: The GBP/USD pair.
- Take Profit: 1.2400
- Stop Loss: 1.2600
- Timeframe: 1-2 days
Bullish View:
- Buy: The GBP/USD pair.
- Take Profit: 1.2600
- Stop Loss: 1.2400
In Summary:
While the GBP/USD has seen a bounce, technical indicators suggest the overall downtrend is likely to continue. Traders should carefully monitor the upcoming US economic data and Fed communications to gauge the future direction of the pair.
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