Drop Below Support Puts 1.3200 in View

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The GBP/USD price continued its freefall as investors reacted to the relatively strong economic data from the United States.

Bearish View

Bullish View

The GBP/USD price continued its freefall as investors reacted to the relatively strong economic data from the United States. These numbers fueled the thinking that the Federal Reserve will be relatively hawkish going forward. It is trading at 1.3335, which was the lowest level since December last year.

Strong US Data

Like in the UK, economic numbers published by the US on Wednesday were better than expected. These numbers suggested that the economy is doing well.

For example, data published earlier this month showed that the unemployment rate dropped to a pandemic era low of 4.6%. The US published data that showed that indeed, the labour market is tightening. Initial jobless claims tumbled to a 52-year low of 199k last week. This was a better figure than the median estimate of 260k. Continuing jobless claims declined to slightly above 2 million.

At the same time, the closely watched personal consumption expenditure index rose to 5.0% in October, which was the biggest increase in about three decades. Therefore, these numbers signal that the Federal Reserve will embrace a more hawkish view. Besides, the two main roles of the bank is to ensure that the unemployment rate is low and that inflation is maintained.

The GBP/USD also reacted to the relatively strong American new home sales numbers. The data showed that sales of new homes jumped from 742 in September to 745k in October. Further numbers revealed that household consumption rose by 1.3% while incomes rose by 0.5%.

The same trend has been happening in the UK, where retail sales and inflation have risen while the unemployment rate has dropped substantially in the past few weeks.

The volume will be relatively low today since US markets will be closed for Thanksgiving. Still, the pair will likely react to a statement by Andrew Bailey of the Bank of England.

GBP/USD Forecast

The daily chart shows that the GBP/USD pair has been in a major bearish trend lately. The pair managed to move below the important support at 1.3350, which was the lowest level on November 15th. It has also formed a descending channel that is shown in red.

The pair has also dropped below the 25-day and 50-day moving averages while the Stochastic oscillator has moved below the oversold level.

Therefore, the pair will likely keep falling as bears target the key support at 1.3250, which is along the lower side of the channel.

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