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Despite the sharp retreat, the outlook for the GBP/USD pair is bullish, with the next level to watch being at last week’s high of 1.2536.
- Buy the GBP/USD pair and set a take-profit at 1.2545.
- Add a stop-loss at 1.2345.
- Timeline: 1-2 days.
- Set a sell-stop at 1.2425 and a take-profit at 1.2345.
- Add a stop-loss at 1.2525.
The GBP/USD pair suffered a harsh reversal on Friday as it erased some of the gains made last week. This reversal happened as the US dollar index drifted upwards after the US published strong jobs numbers. It retreated to a low of 1.2450, lower than last week’s high of 1.2545.
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It will be a relatively quiet week for the GBP/USD since there is no major planned economic data from the US and the US. Also, some of the key events that moved the pair recently have already happened. For example, the US already passed a debt ceiling bill, eliminating the biggest risk in the market.
At the same time, the US already published a mixed jobs report on Friday. The data showed that the American economy added over 339k jobs in May, higher than expected. At the same time, the unemployment rate jumped to 3.7%.
Still, these numbers, coupled with the elevated inflation figure and the reduced risks in the banking market, meaning that the Fed could be forced to deliver another 0.25% rate hike this month.
There wil be no major data that could move the GBP/USD pair this week. The most important figure will be the services and composite PMI report from the US and the UK. While these are crucial numbers, their impact on forex pairs will be limited.
The other key numbers to watch will be the UK house price index by Halifax and the UK construction PMI number. Meanwhile, data by the CFTC showed that speculators were increasing their bullish bet on the pound. The speculative net positions rose to 13.2k last week from the previous 11.6k. These bets have been rising after falling to a low of -79.6k in May last year.
The GBP/USD pair retreated sharply after the strong US jobs report number. As it fell, it moved to the key support level at 1.2447, the highest point on May 30th. As such, it has formed a break and retest pattern. The pair stayed above the 50-period moving average and the Ichimoku cloud indicator. Further, the MACD has moved above the neutral point.
Therefore, despite the sharp retreat, the outlook for the pair is bullish, with the next level to watch being at last week’s high of 1.2536. A move below the support at 1.2400 will invalidate the bullish view.
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