{x} | Trading.live

Abstract: The GBPUSD came under bearish pressure again on Tuesday, falling to 1.2400. Disappointing U.S. consumer confidence data led to depressed market sentiment, boosting the USD and putting the GBPUSD on the defensive.

Fundamentals

The GBPUSD showed a strong upward trend after regaining its psychological resistance level of 1.2500 in the Asian session. However, the USD's bottoming out has weakened the GBPUSD's performance; By the end of the New York session, the GBPUSD had returned to the threshold of 1.2400 as investors expected the Fed to end its quantitative tightening program after raising interest rates by 25 basis points in May. (Positive for USD)

Meanwhile, U.S. consumer confidence has fallen this month to its lowest level since last July because of more pessimistic views on the economic outlook.

The data released on Tuesday showed that consumer confidence from the U.S. Conference Board dropped from 104 in March to 101.3 in April, with an expected median of 104. Consumer expectations fell to 68.1, the lowest level since last July. However, the Consumer Status Index rose to 151.1.

Futures on the S&P 500 index edged lower in Asia after a modest rally on Monday, indicating a decline in investors' risk appetite.

This week, 500 U.S. stocks are expected to fluctuate sharply as big technology companies report results for the first quarter of fiscal year 2023. Meta Platforms, Google, and Microsoft will announce their quarterly results and revenue guidance, which will put investors on tenterhooks.

This week, the U.S. Dollar Index is expected to remain active ahead of preliminary gross domestic product (GDP) data due on Thursday. Annualized GDP is expected to contract to 2.0% in the first quarter, compared with the previous forecast of 2.6%. The drop in GDP data will exacerbate fears of a slowdown in the U.S. economy. It could also force the Fed to take a stable stance on interest rate guidance.

On the UK side, UK factory orders contracted again in April, with monthly data flat from March, hitting a more than two-year low. The good news is that corporate optimism improved from -5 to -2 in the quarter, although it is still in the negative region, at least it is the highest level since October 2021.

The chances of the Bank of England adopting a hawkish monetary policy are on the rise because inflation in the UK seems to be struggling to stay in double digits amid labor shortages and soaring food inflation. UK's food inflation rate has soared to a 45-year high of 19.1% and has yet to show signs of softening. BOE governor Bailey may seek a further 25 basis points to 4.5%.

Technical Analysis

After a week of consolidation, the GBPUSD successfully closed above the December-January cap of 1.2445 on Monday, bringing the market's focus once again to a higher high. However, it did not last long. The strong rebound of the USD put the GBPUSD on the defensive again.

Nevertheless, RSI and MACD have yet to correct their negative momentum. As prices regain their footing near their 20-day SMA and the lower edge of the seven-week bullish channel, it still seems likely that they will continue to move higher.

This means that bulls need to test again and break the 1.2500 level before they can reach the peak of 1.2665 from April to May 2022.

If the price reverses, the closing price below the threshold of 1.2400 will raise doubts about the continuation of the bullish.

Overall, it should be cautious when staying bullish toward the GBPUSD in the near term. A further upward trend can only be recognized if it is firmly closed above 1.2520. It is recommended to go long at the lows.

Trading Recommendations

Trading direction: Long

Entry price: 1.2400

Target price: 1.2666

Stop loss: 1.2270

Deadline: 2022-05-09 23:55:00

Support: 1.2377, 1.2345, 1.2274

Resistance: 1.2471, 1.2546, 1.2666