Election Looming! GBP/USD Eyes 1.36

Summary:

With relatively few UK economic data releases ahead of the weekend, the direction of GBP/USD over the next few trading days will depend almost entirely on the movement of the dollar.

BUY GBPUSD

Close Time

CLOSED

1.35700

Entry Price

1.40000

1.32000

1.35916 -0.00015 -0.01%

60.3

Pips

Profit

1.32000

1.36303

Exit Price

1.35700

Entry Price

1.40000

Fundamentals

Jane Foley, Head of FX Strategy at Rabobank, said: “Since the war began, the biggest news for the pound has been the shift in how the money markets are pricing in expectations for Bank of England rate hikes. Before the war, the market expected rate cuts, but that quickly shifted to expectations of rate hikes. As a result, the pound has been one of the best-performing G10 currencies since the war began. “Money markets had previously anticipated at least two 25-basis-point rate hikes by the Bank of England this year, with a strong likelihood of a third hike. Last week, the Bank of England kept rates unchanged but did not rule out the possibility of a hike. However, Foley noted that the UK economy is showing some signs of weakness, and rate hikes could exacerbate this weakness. She said this could ultimately put pressure on the pound, while the local elections on May 7 also represent a risk factor.”

Regarding U.S. economic data, figures released on Tuesday showed that the number of job openings in March edged down to 6.866 million, but hiring surged, indicating that the labor market is regaining its footing after struggling last year. The stability in the labor market has bolstered financial markets’ expectations that the Federal Reserve will keep interest rates unchanged this year. Last week, the Federal Reserve kept its benchmark overnight interest rate unchanged at the 3.50%-3.75% range, citing heightened inflation concerns. Another industry survey showed that the Institute for Supply Management’s (ISM) Non-Manufacturing Purchasing Managers’ Index (PMI) for April came in at 53.6, slightly below the expected 53.7. Driven by soaring energy prices resulting from the U.S.-led war against Iran, the expansion of the U.S. services sector slowed for the second consecutive month in April, with the decline in new orders marking the sharpest drop in three years, while input cost pressures remained at their highest level since late 2022.

Technical Analysis

On the daily chart, the GBP/USD pair shows Bollinger Bands widening upward and moving averages diverging upward, indicating that the overall uptrend remains intact. The MACD fast and slow lines continue to trade above the 0 line, and the RSI stands at 57, suggesting that market sentiment is predominantly bullish. On the 4-hour chart, the Bollinger Bands are narrowing, moving averages are flattening, and the price is oscillating upward along the EMA12. The MACD fast and slow lines are on the verge of a golden cross, and the price is likely to test the 1.37 level again. With the RSI at 55, market sentiment is predominantly cautious. The recommended strategy is to buy on dips.

Trading Recommendation

Trading Direction: Buy

Entry Price: 1.356

Target Price: 1.4

Stop-Loss Price: 1.32

Support Levels: 1.32, 1.3, 1.28

Resistance Levels: 1.36, 1.38, 1.41

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Election Looming! GBP/USD Eyes 1.36

Risk Disclosure