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The GBP/USD also crashed after the extremely hawkish minutes of the Fed meeting.
- Sell the GBP/USD pair and set a take-profit at 1.1980.
- Add a stop-loss at 1.2095.
- Timeline: 1 day.
- Set a buy-stop at 1.2065 and a take-profit at 1.2135.
- Add a stop-loss at 1.1985.
The GBP/USD pair retreated after the FOMC minutes showed that the Fed was committed to implementing more rate hikes. It dropped to a low of 1.2037, which was lower than this week’s high of 1.2145.
The GBP/USD pair retreated after some encouraging news by analysts at Citigroup. In a note, they argued that UK’s inflation could fall below 2% later this year, helped by the falling fuel prices. This was a notable note considering that the same analysts warned that inflation would rise to 18% this year in 2022.
In the new estimate, Citi said that food and fuel prices in the country were falling at a faster pace than expected. At the same time, the broad worries of a recession will help to lower inflation. Inflation in the UK has remained above 10% in the past few months, pushing the Bank of England to deliver numerous rate hikes.
The GBP/USD also crashed after the extremely hawkish minutes of the Fed meeting. These minutes showed that most members of the committee believe that the Fed should continue hiking rates. Most of them supported the lower 0.25% that the bank implemented,
The FOMC meeting came before the US published strong jobs, inflation, and retail sales numbers. The unemployment rate dropped to 3.4% while inflation came in at 6.4%. Data published last week revealed that the country’s retail sales jumped at the fastest pace in months.
The GBP/USD pair will next react to the upcoming GDP numbers from the US. While these numbers are important, they will not have a major impact on the pair because the US already published the first estimates in January. As such, the pair will continue reacting to the FOMC minutes.
The GBP/USD pair retreated from this week’s high of 1.2147 to a low of 1.2042 after the FOMC minutes. As it dropped, the pair managed to move below the 50-day moving average. It has also formed a head and shoulders pattern. The pair has moved below the Ichimoku cloud while the Relative Strength Index (RSI) and the MACD continued moving downwards.
Therefore, the pair will likely continue falling as sellers target the psychologically important level at 1.200. A move below that support will see it drop to 1.1985. A move above the key resistance point at 1.2080 will invalidate the bearish view.
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