Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.2550.
- Add a stop-loss at 1.2775.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.2670 and a take-profit at 1.2600.
- Add a stop-loss at 1.2775.
The GBP/USD exchange rate held steady near its highest level in two months even as the risk-off sentiment spread in the market. It was trading at 1.2662 on Wednesday morning, up by 4.60% from its lowest level this year.
US consumer confidence slips
The GBP/USD pair rose after the US published weak consumer confidence data. According to the Conference Board, the consumer confidence crashed to the lowest level in two years as concerns about Donald Trump’s policies continued. The confidence fell to 98.3, in its third consecutive month of decline.
Consumers are concerned about inflation now that Donald Trump has confirmed that tariffs between the US and top trading partners like Canada and Mexico will go on. He has also warned that the country will impose tariffs on stell and aluminum and for goods from the European Union.
A tariff is a tax that consumers pay since many companies just hike prices to compensate for their payments. A 25% tariff on steel and aluminium will lead to a similar jump in home, vehicle, and other products.
The falling consumer confidence triggered a big decline in American technology stocks as investors embraced a risk-off sentiment.
Looking ahead, there will be no major UK economic data on Wednesday. Instead, traders will watch the upcoming building permits and new home sales data. Economists polled by Reuters expect the data to show that new home sales dropped from 698k to 677k, while building permits remained at 1.483 million.
The next key data that may move the GBP/USD pair will come out on Thursday and Friday. The statistics agency will publish the second estimate of UK GDP data on Thursday, followed by the closely-watched personal consumption expenditure data on Friday. These numbers are important because the PCE is the most popular inflation gauge in the US.
GBP/USD technical analysis
The GBP/USD pair has bounced back in the past few weeks, moving from a low 1.2100 in January to a high of 1.2665. It has moved above the 38.2% Fibonacci Retracement level and is slowly nearing the 50% one. The pair has also moved comfortably above the 50-day and 25-day Exponential Moving Averages (EMA).
Oscillators show that the pair is gaining momentum, with the Relative Strength Index (RSI) and the MACD indicators pointing upwards. However, the pair has formed a rising wedge pattern, pointing to a potential retreat in the next few days. Such a move will see it drop to the 50-day moving average at 1.2550.
Ready to trade our free Forex signals? Here is our list of the top 10 Forex trading platforms worth reviewing.