Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.3450.
- Add a stop-loss at 1.3240.
- Timeline: 1-2 days.
Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.3250.
- Add a stop-loss at 1.3450.
The GBP/USD exchange rate held steady this week after the UK reached a deal between the United Kingdom and India. It rose to a high of 1.3370, a few points below the year-to-date high of 1.3432.
UK and India trade deal
The GBP/USD pair rose slightly after the UK and India reached a trade deal that included tariffs cuts on UK goods to the Indian market. Also, the deal will exempt UK operations of Indian employers from paying national insurance on Indian staff relocating to the UK for up to three years.
This is the first major deal that the UK signed after the Brexit vote in 2016. If it works, it will likely boost UK’s exports to India, a large market with over 1.43 billion people.
The GBP/USD pair also reacted to the latest UK services and composite PMI report. According to S&P Global, the services PMI dropped from 52.5 in March to 49 in April, while the composite figure fell from 51.5 to 48.5.
These numbers mean that the country’s services sector is contracting, which my put pressure on the Bank of England when it meets on Thursday. Economists expect the bnk will cut interest rates by 0.25%, bringing the benchmark target to 4.25%.
The other notable catalyst for the GBP/USD will be the upcoming Federal Reserve interest rate decision. Unlike the BoE, analysts expect the bank to leave interest rates unchanged, continuing a trend that has been going on this year.
The Fed wants more time to assess the impact of tariffs on the US economy. While prices remain low, it expects tht they will continue rising later this year as the impact of these tariffs start to flow in the economy.
GBP/USD technical analysis
The GBP/USD pair bottomed at the 50-period moving average at 1.3270 on Tuesday and then bounced back. It is slowly approaching the important resistance level at 1.3431, the upper side of the cup-and-handle chart pattern, a popular continuation sign.
The depth of this pattern is almost 10%, meaning that the pair will ultimately soar to 1.4762 later this year. A move below the key support at 1.3241, the lower side of the handle, will point to more gains, potentially to the psychological level at 1.3000.
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