Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.3750.
- Add a stop-loss at 1.3500.
- Timeline: 1-2 days.
Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.3500.
- Add a stop-loss at 1.3750.
The GBP/USD exchange rate jumped to its highest level since January 2022 after the latest US consumer confidence data and Federal Reserve Chair statement. It jumped to a high of 1.3647, up by over 12% from its lowest point this year.
Jay Powell statement and US consumer confidence data
The GBP/USD pair rose after a report by confidence data. A report by Conference Board showed that consumer confidence dropped to 93 in June from 98.4 in May as concerns about the economy and tariffs continued. A closely-watched measure of consumer expectations fell 4.6 points in June.
A weaker consumer confidence is risky for the economy because consumer spending is the biggest part of the American economy. As such, it is likely that the economy will sink into a technical recession, where it contracts for two consecutive quarters.
The pair also jumped after Jerome Powell testified before Congress on Tuesday. In his statement, he pushed back against calls for the bank to cut interest rates as some Fed officials have called for.
He said that he would not support a rate cut, at least early autumn, arguing that Trump’s tariffs would cause inflation. Fed officials like Christopher Waller and Michelle Bowman hinted that they would support a rate cut in July, noting that inflation was not rising as fast as expected.
The GBP/USD pair also jumped after Donald Trump announced a truce between Iran and Israel, ending a 12-day war. Ending this war lowered tensions and pushed crude oil prices lower.
The next key catalyst for the GBP/USD pair will be the second day of Powell’s testimony and new home sales. Economists expect the data to show that new home sales dropped to 0.69 million.
GBP/USD technical analysis
The daily chart shows that the GBP/USD exchange rate rose to a high of 1.3645, up by over 12% from the lowest point this year. It has moved above the key support level at 1.3435, the upper side of the cup-and-handle pattern.
The pair has moved above the 50-day and 100-day Exponential Moving Averages (EMA), while the Stochastic Oscillator and the Relative Strength Index (RSI) have pointed upwards.
Therefore, the pair will likely continue rising as bulls target the next key resistance level at 1.3750. A move below the support at 1.3500 will invalidate the bullish view.
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Crispus Nyaga is a financial analyst, coach, and trader with more than 8 years in the industry. He has worked for leading companies like ATFX, easyMarkets, and OctaFx. Further, he has published widely in platforms like SeekingAlpha, Investing Cube, Capital.com, and Invezz. In his free time, he likes watching golf and spending time with his wife and child.
