(MENAFN- Daily Forex) Bearish View
Sell the GBP/USD pair and set a take-profit at 1.2500. Add a stop-loss at 1.2900. Timeline: 1-2 days.
Bullish View
Set a buy-stop at 1.2755 and a take-profit at 1.2950. Add a stop-loss
at 1.2500.
The GBP/USD pair plunged to its lowest level in almost three months as geopolitical concerns remained elevated. It retreated to 1.2740, down by over 5.14% from its highest level this year.
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Forex Brokers1 Get Started 74% of retail CFD accounts lose money US Dollar
index Surges
The GBP/USD exchange rate's sell-off gained steam as the US dollar index continued its strong recovery after Donald Trump's win. It jumped to $106.17, its highest level since May 2nd.
Similarly, the US government bond yields continued rising, with the 10-year rising to 4.4%. The five-year yield jumped to 4.315% as odds of a less dovish Federal Reserve rose.
Investors are anticipating that Trump will implement huge tariffs on European goods in a big to bridge the trade deficit that has grown in the past few years.
Other parts of Trump's policies like deportations will likely lead to higher inflation, which will push the Fed to go slow on interest rate cuts.
The next key catalyst for the GBP/USD exchange will be the upcoming US inflation data on Wednesday. Economists expect these numbers to show that inflation remained above 2% in October as services costs remained elevated.
The US inflation report will come a week after the Federal Reserve slashed interest rates by 0.25%, bringing the year-to-date cuts to 0.75%. Analysts expect the bank to deliver another cut in December.
Similarly, the Bank of England slashed rates by 0.25% but hinted that it would take a gradual pace of cutting rates because inflation remains stubbornly high/USD Technical Analysis
The GBP/USD pair
has been in a strong downward trend and is nearing the 23.6% Fibonacci Retracement level. It has also crashed below the ascending trendline that connects the lowest swings since May. The Relative Strength Index (RSI) has continued to point downwards.
EURUSD Chart by TradingView
The pair has dropped below the Ichimoku cloud indicator. It also formed a head and shoulders pattern, pointing to more downside. If this happens, the next reference level to watch will be at the 38.2% Fibonacci Retracement level at 1.2250. Before that happens, the pair will need to cross the psychological level of 1.2500.
On the flip side, a move above the 200-day WMA at 1.2925 will invalidate the bearish view and signal that there are more bulls left in the market.
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