(MENAFN- Daily Forex) Bearish view

• Sell the GBP/USD pair and set a take-profit at 1.3430.
• Add a stop-loss at 1.3785.
• Timeline: 1-3 days.

Bullish view

• Buy the GBP/USD pair and set a take-profit at 1.3700.
• Add a stop-loss at 1.3430.

The GBP/USD exchange rate continued its downward trend on Thursday as the market reacted to the ongoing trade war and the release of the Federal Reserve minutes. It moved from the year-to-date high of 1.3784 to below the psychological point at 1.3600.

FOMC Minutes and Trade War

The GBP/USD pair pulled back after the Federal Reserve released the minutes of its last meeting. These minutes showed an emerging divide among policymakers over the outlook for interest rates and inflation.

Some Fed officials noted that Donald Trump's tariffs would cause a one-time price increase, while most others said that the tariffs would have a more persistent impact.

Most of these officials estimated that the bank would cut interest rates twice this year. Some menbers estimated that the bank would not cut rates this year, a move that would disappoint Trump, who has called for a 300 basis point cut.

The minutes also provided more color on how the tariffs had impacted the Fed's outlook of inflation and interest rates. In a recent statement, Jerome Powell predicted that the bank would have delivered several cuts so far this year if Trump had not started his trade war.

The trade war escalated this week as Donald Trump started sending letters to other countries threatening them of higher levies in August. He sent letters to countries like Algeria, Libya, and Iraq.

There will be no major economic data from the United States and the UK today. Instead, market participants will react to the upcoming UK GDP, manufacturing and industrial production, and trade numbers scheduled for Friday.

Economists expect the data to show that the economy grew by 0.1% in May after contracting by 0.3% in the previous month. Industrial and manufacturing indices are expected to have retreated slightly in May.

EURUSD Chart by TradingViewGBP/USD Technical Analysis

The GBP/USD exchange rate peaked at 1.3785 earlier this month and then started a downward trend amid profit-taking among investors. This decline happened after it retested the upper side of the ascending channel.

The pair seems focused on dropping to the lower side of the ascending channel, which coincides with the key support at 1.3430, the upper side of the cup and handle pattern. It will then bounce back after completing the break-and-retest pattern.

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