Current trend

The GBP/USD pair has been declining for the second month, reaching the November low of 1.2405 amid differences in approaches to monetary policy by the US Fed and the Bank of England.

The situation in the American economy does not meet the requirements of regulator officials to begin interest rates decrease. The labor market remains strong, consumption is stable, and inflation shows new signs of growth, reaching 3.5% in March, retreating from the target level of 2.0%. So, the US Fed officials took a cautious position, and its head, Jerome Powell, said that the fight against rising prices might take longer than expected, so borrowing costs should be kept at current levels. Now, most experts expect the transition to the “dovish” rate will take place no earlier than September, supporting the US currency.

Meanwhile, the Bank of England is forecast to begin adjusting monetary policy in June or even May, aided by a weakening labor market, where the unemployment rate corrected to 4.2% in February and employment by –156K, and persistent slowdown inflation. In March, the consumer price index was 3.2% YoY versus forecasts of 3.1%, and the core rate was 4.2% versus 4.1%. Investors’ hopes for a quick start to interest rate adjustments remain, ensuring further declines in the asset.

Support and resistance

The trading instrument is trying to consolidate below 1.2451 (Murrey level [0/8]), after which it is expected to decline to the area of 1.2329 (Murrey level [–1/8]) and 1.2300. A breakout of the key “bullish” level of 1.2573 (Murrey level [2/8]), supported by the middle line of Bollinger Bands, will allow the quotes to grow to the area of 1.2695 (Murrey level [4/8]) and 1.2756 (Murrey level [5/8]).

Technical indicators confirm the continued decline of the asset: Bollinger bands are directed downwards, and the MACD histogram is increasing in the negative zone. Stochastic may leave the oversold zone, which does not exclude the development of a limited correction.

Resistance levels: 1.2573, 1.2695, 1.2756.

Support levels: 1.2451, 1.2329, 1.2300.

Trading tips

Short positions may be opened from 1.2425, with the targets of 1.2329, 1.2300, and stop loss of 1.2490. Implementation time: 5–7 days.

Long positions may be opened above 1.2573, with the targets at 1.2695, 1.2756, and stop loss 1.2530.