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GBP/USD Forex Signal: More Downside to 1.1840 Possible – 20 February 2023

The GBP/USD pair dropped below the key support level at 1.1966 (Feb 7 low) last week.


Bearish view

Sell the GBP/USD pair and set a take-profit at 1.1840.Add a stop-loss at 1.2233.Timeline: 1-2 days.

Bullish view

Set a buy-stop at 1.2130 and a take-profit at 1.2230.Add a stop-loss at 1.2050.

The GBP/USD price rose slightly on Friday as a relatively busy week in the market. After falling to a multi-week low of 1.1915 on Friday, the pair rebounded after the UK published strong retail sales numbers to a high of 1.2045.

Strong UK and US data

Last week was significantly busy in the market as the UK and the US published mixed economic data. In the US, data showed that inflation remained sticky even as the annual CPI dropped on a year-on-year basis. The broad CPI dropped to 6.4%, which was slightly higher than what analysts were expecting.

Additional data showed that the producer price index (PPI) data remained at an elevated level in January. Despite all this, America’s retail sales rose by 3% in January, the biggest increase in two years. Therefore, these numbers mean that the American consumer remained relatively healthy.

As a result, several Fed speakers, including James Bullard, Loretta Mester, and Michele Bowman argued that the bank has more room to hike rates. Mester believes that the Fed should hike by 50 basis points in the upcoming meeting. However, most officials who talked last week expect Bowman don’t have a vote at the FOMC.

Meanwhile, data from the UK painted a similar picture. The unemployment rate remained at 3.4% while inflation remains at over 10%. Retail sales numbers published on Friday showed that consumer spending is also strong in the country.

With all these numbers behind us, the focus will be on what to expect in the coming Fed and BoE meetings. A good indicator will be the upcoming Fed minutes, which will be published on Wednesday. These minutes will provide more color about what to expect in March’s meeting.

GBP/USD analysis

The GBP/USD pair dropped below the key support level at 1.1966 (Feb 7 low) last week. It then quickly rebounded after the strong UK retail sales data on Friday. It rose and retested the important support at 1.2035 (Feb 13 low). The pair moved below the 50-period moving average and the important level at 1.1995 (December 22 low.

Meanwhile, the Relative Strength Index (RSI) has moved to the neutral point of 50. Therefore, the pair will likely continue falling as sellers target the next key support level at 1.1840 (Jan 6 low). The stop-loss of this trade is at 1.2192.

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