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The GBP/USD pair has been in a steep sell-off in the past few months.
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- Sell the GBP/USD pair and set a take-profit at 1.2180.
- Add a stop-loss at 1.2130.
- Timeline: 1 day.
- Set a buy-stop at 1.2200 and a take-profit at 1.2300.
- Add a stop-loss at 1.2100.
The GBP/USD pair continued falling as investors embraced a risk-off sentiment. The exchange rate slipped to a low of 1.2164, the lowest level since March. It has been in a steep freefall from the year-to-date high of 1.3140.
The GBP/USD pair has been in a strong downward trend as traders reflected on the rising risks. The US dollar index jumped to $106 for the first time in more than six months. It has jumped sharply from this year’s low of $99.5.
The dollar rally continued after the latest US new home sales and consumer confidence data. Economic numbers showed that new home sales dropped from 739k in July to 675k in August. The decline was worse than the median estimate of 700k.
Another report by the Conference Board revealed that consumer confidence dropped from 108.7 in August to 103 in September. Again, that was worse than the median estimate of 105.5. It was also the lowest it had been at for months.
Consumer confidence is an important number because of the role that consumer spending plays in the economy. As such, highly confident consumers spend more and vice versa.
American consumers are struggling because of the rising interest rates. Recent data shows that mortgage rates have soared to over 7.7%, the highest level in decades. Also, delinquency rates on credit card debt and other personal loans has been soaring recently.
The GBP/USD pair has also dropped as concerns about the US government shutdown rise. Congressional leaders have struggled to pass a bill to prevent a shutdown for weeks. In a note on Monday, Moody’s warned that a shutdown will have a negative impact on the economy.
The key economic data to watch on Wednesday will be the latest durable goods orders numbers from the US.
The GBP/USD pair has been in a steep sell-off in the past few months. As it crashed, the pair has remained below the 50-period moving average. It also slipped below the crucial support level at 1.2315, the lowest point on May 25th. The pair has dropped below the ichimoku cloud indicator while the MACD has slipped below the neutral point.
Therefore, the outlook for the pair is neutral, with the next reference level to watch being at 1.2085. The stop-loss of the bearish view is at 1.2315.
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