Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.3850.
- Add a stop-loss at 1.3650.
- Timeline: 1-2 days.
Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.3650.
- Add a stop-loss at 1.3850.
The GBP/USD exchange rate rose to a crucial resistance level as the US dollar’s decline intensified. The pair jumped to 1.3720, its highest level since October 2021. It has jumped by over 13% from its lowest point this year.
British Pound Surge Continues
The GBP/USD pair has continued its strong rally over the past few months due to the ongoing dollar decline. The dollar index has plummeted from its year-to-date high of $110 to the current $ 96.50.
Analysts anticipate that the US dollar index has more downside in the coming months. In a recent note, Morgan Stanley analysts predicted that the index would ultimately plunge to $90 later this year.
The GBP/USD pair rose as the market started to predict an upcoming Federal Reserve interest rate cut. In a statement on Monday, Goldman Sachs analysts said that the Fed would start cutting interest rates in September as the inflationary impact of tariffs remains smaller than expected.
The statement mirrored that of Fed officials like Christopher Waller and Michele Bowman, who have called for a rate cut in July. Jerome Powell, the Fed Chair, will speak today, July 1, and possibly reiterate his view that the bank will adopt a wait-and-see approach.
The other notable catalyst for the GBP/USD exchange rate will be the upcoming US and UK manufacturing PMI data. Economists expect the UK manufacturing PMI rising from 46.6 in May to 47.7 in June, while the US figure rising from 48.5 to 48.8.
While this improvement will be good, it remains much lower than the expansion zone of 50. It is a sign that Trump’s tariffs are having an impact on corporations.
The pair will also react to a statement by the Bank of England’s (BoE) Andrew Bailey.
GBP/USD Technical Analysis
The daily chart shows that the GBP/USD exchange rate has been in a strong bull run. It has remained above the important support level at 1.3428, its highest swing in September last year.
The pair has remained above the 50-day and 100-day moving averages, while the Relative Strength Index (RSI) has moved above the neutral point.
It has also moved to the upper side of the ascending channel. Therefore, the pair will likely continue rising as bulls target the next key resistance level at 1.3850. The alternative scenario is where the pair drops to the key support at 1.3430.
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Crispus Nyaga is a financial analyst, coach, and trader with more than 8 years in the industry. He has worked for leading companies like ATFX, easyMarkets, and OctaFx. Further, he has published widely in platforms like SeekingAlpha, Investing Cube, Capital.com, and Invezz. In his free time, he likes watching golf and spending time with his wife and child.