GBP/USD Signal Today - 30/05: USD Bond Surge (Chart)

(MENAFN- Daily Forex) Bearish view

  • Sell the GBP/USD pair and set a take-profit at 1.2665.
  • Add a stop-loss at 1.2750.
  • Timeline: 1-2 days.
Bullish view
  • Set a buy-stop at 1.2720 and a take-profit at 1.2800.
  • Add a stop-loss at 1.2650.

The GBP/USD exchange rate retreated sharply in the overnight session as US bond yields jumped after a weak auction. It tumbled to a low of 1.2710, much lower than this week's high of 1.2800 as the US dollar index (DXY) jumped by almost 40 basis points to $105 bond yields jump

The main catalyst for the GBP/USD pair plunge was this week's bond sales by the US government. An auction of $44 billion seven-year Treasury notes saw weak demand, with primary dealers buying just 17% of the offering.

It was the third weak US bond auction and is a sign that investors are getting jittery about the US debt. The total government debt has jumped to over $34.6 trillion this year and the figure is soaring by $1 trillion every three months.

The 10-year bond yields jumped by over 1.65% to 4.61% while the 30-year and the 5-year rose to 4.68% and 4.52%, respectively. Bond yields move inversely to prices. At the same time, the 10-2 year spread stood at minus 43.25 and is going through its longest yield curve inversion on record.

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Sterling's retreat happened after strengthening sharply in the past few weeks. It has soared to a multi-decade high against the Japanese yen and to a 21-month high against the euro. This trend happened as traders predicted that the Bank of England would take longer to start cutting interest rates .

The next important economic event to watch will be the upcoming statement by Andrew Bailey, the head of the BoE. He will likely talk more about the state of the country's economy after last week's report showed that inflation cooled at a slower pace in April.

The US will publish the second estimate of the country's GDP data and jobless claims data. The first estimate showed that the economy expanded by 1.6% in Q1 after growing by 3.4% in the fourth quarter of 2023.

The US will also publish the closely-watched PCE report on Friday. This is an important inflation number that provides more information about changes in price movements in urban and rural areas/USD technical analysis

The GBP/USD exchange rate peaked at the psychological point of 1.2800 (the highest point since March 14th) on Friday. It has now pulled back and dropped below the Woodie pivot point . Most notably, the pair has moved to 1.2710, its highest swing on April 9th. This was an important level because it was the neckline of the inverse head and shoulders pattern.

Therefore, the pair will likely continue falling as sellers target the crucial support level at 1.2667, its 61.8% Fibonacci Retracement point . This view will be confirmed if the pair moves to the Woodie pivot point at 1.2695.

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