Bearish View
- Sell the GBP/USD pair and set a take-profit at 1.3240.
- Add a stop-loss at 1.3300.
- Timeline: 1 day.
Bullish View
- Set a buy-stop at 1.3360 and a take-profit at 1.3450.
- Add a stop-loss at 1.3300.
The GBP/USD pair declined sharply on Tuesday as risks in Europe continued. The pair dropped to 1.3300, which was the lowest level since last week. It has fallen by more than 1% below its highest level on Monday.
Risk-Off Sentiment
The GBP/USD pair declined as investors rushed to the safety of the US dollar. The drop coincided with the sharp drop of American equities as the Dow Jones and Nasdaq 100 index dropped by more than 600 and 200 points. It also happened as the price of crude oil jumped to the highest level in more than 7 years. Brent rose to a multi-year high of $105.
Investors are concerned that the war in Ukraine is getting out of hand. On Tuesday, Russia continued to bombard key Ukrainian cities with bombs as a 40 mile motorcade of officials continued to approach Kiev. At the same time, there are worries that the sanctions on Russia will hurt the UK economy.
Data published on Tuesday showed that the housing industry was still strong. The UK approved 74k mortgages in February while net lending to individuals rose to 5.92 billion pounds.
Further data revealed that the country’s manufacturing PMI rose from 57.3 in January to 58.0 in February. The Nationwide Society will publish the latest home price index data today.
The next key catalyst for the pair will be the latest ADP jobs estimate numbers from the UK. Analysts expect the data to show that the private sector created 350k jobs in February after it lost 30lk in January. Historically, the ADP figure has no major impact on the US dollar because it is not a good signal of the official jobs numbers.
The GBP/USD will also react mildly to the latest OPEC+ meeting. Saudi Arabia has already hinted that it will stick to proposals by OPEC.
GBP/USD Forecast
The GBP/USD pair has been in a strong bearish trend in the past few days. On Tuesday, it managed to move below the key support level at 1.3357, which was the lowest level in January. It also moved below last Friday’s low of 1.3326. It has moved below the 25-day and 50-day moving averages. The pair has also fallen below the 61.8% Fibonacci retracement level. Therefore, the pair will likely continue falling as bears target the next key level at 1.3250.
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