GBP/USD Holds Below 1.3588 as UK Election Results and Fed Policy Shape Outlook

In April, the Bank of England kept the interest rate at 3.75%, with the decision split 8:1, as one official preferred raising the rate to 4.00%. In March, the consumer price index rose from 3.0% to 3.3% year-on-year, while the broader CPIH indicator increased to 3.4%. Meanwhile, in February, gross domestic product (GDP) grew by 0.5% month-on-month and by the same amount over the three months to February, increasing the investment appeal of the pound.

The U.S. Federal Reserve kept borrowing costs in the range of 3.50–3.75%, noting an acceleration in inflation amid higher energy prices: the March figure reached 0.9% month-on-month and 3.3% year-on-year, while the core consumer price index stood at 2.6% and 4.3%, respectively. The number of new nonfarm jobs increased by 178,000. Thus, conditions still do not support a rapid easing of monetary policy, which limits the positive dynamics of GBP/USD. Today at 14:30 (GMT+2), investors will focus on employment changes: according to forecasts, the figure is expected to reach 65,000, which may put pressure on the national currency and allow GBP/USD to break above 1.3588; otherwise, the pair may decline toward 1.3452.

Support and resistance levels

The long-term trend remains upward: last month, quotes reached the resistance level of 1.3588, which they continue to test. After consolidation above this level, a move toward 1.3700 and 1.3847, the yearly high, is expected. However, in the event of a correction to the support level of 1.3452, short positions with a target of 1.3588 may become relevant.

The medium-term trend also remains upward: last week, the price crossed the 1.3511–1.3479 zone and headed toward zone 2 at 1.3813–1.3783. Long positions may be opened on a correction from the main support area of 1.3353–1.3323 with targets at 1.3490 and 1.3657, or from the additional support area of 1.3497–1.3481 with a target of 1.3657.

Resistance levels: 1.3588, 1.3700, 1.3847.

Support levels: 1.3452, 1.3222

Trading scenarios and GBP/USD forecast

Long positions may be opened from the level of 1.3452 with a target of 1.3588 and a stop-loss at 1.3400. The expected implementation period is 9–12 days.

Short positions may be opened below the level of 1.3400 with a target of 1.3222 and a stop-loss at 1.3470.