The GBP/USD currency pair is experiencing a downward trend, with prices currently hovering around 1.3338 during the European trading session on Monday. This downward movement is primarily attributed to the US Dollar's strength, which is supported by growing expectations of a Federal Reserve interest rate hike this year. The US Dollar Index, tracking the Greenback's value against six major currencies, has maintained its gains from Friday, currently sitting at 100.10.
The recent release of strong United States Nonfarm Payrolls data for May, indicating a significant job creation of 172K, has further fueled the Federal Reserve's hawkish stance. This data has increased the likelihood of at least one interest rate hike this year to 74.2%, as indicated by the CME FedWatch tool.
This week, the GBP/USD pair's movement will be significantly influenced by the release of the US Consumer Price Index (CPI) data for May and the United Kingdom's Gross Domestic Product (GDP) data for April. These economic indicators will provide crucial insights into the economic health of both the US and the UK.
From a technical analysis perspective, the GBP/USD pair is displaying a bearish near-term bias, trading below the 20-day Exponential Moving Average (EMA) at 1.3434. The overall trend is characterized by a sideways movement within a Symmetrical Triangle formation. The pair has broken away from its recent consolidation highs, with the Relative Strength Index (RSI) near 38 suggesting building downside pressure.
On the resistance side, the initial hurdle is the 20-day EMA at 1.3434. A break above this level could expose the descending resistance trend line near 1.3585. Conversely, the former rising support structure, now at 1.3239, acts as the first meaningful support level. A clear drop through this zone could lead to a deeper bearish extension towards 1.3200.
In conclusion, the GBP/USD pair's downward trend is likely to persist, influenced by the US Dollar's strength and the Federal Reserve's hawkish stance. The upcoming economic indicators will play a crucial role in shaping the pair's movement, with potential support levels at 1.3239 and 1.3200. However, the overall trend remains sideways, with a Symmetrical Triangle formation suggesting a potential breakout in either direction.
