GBPUSD declines in response to dollar strengthening after US data

On Tuesday, the GBPUSD currency pair shows a decline after the release of strong economic data in the United States.

According to statistics published on Monday on retail sales in the US, their value in March increased by 0.7%. Investors' expectations suggested the indicator growth by 0.3%. In addition, the February value was raised from 0.6% to 0.9%.

Markets are increasingly wondering about the future course of the Fed's monetary policy amid the publication of the latest economic data. In addition to retail sales growth, the US also recorded an upturn in employment and accelerating inflation in March. As a result, chances of the regulator's rate cut in June are decreasing, while the dollar, on the contrary, is gaining strength.

According to CME FedWatch, there is a 41% chance that the Fed will reverse monetary policy in early summer. Before the publication of information on retail sales, this indicator was equal to 50%.

Meanwhile, UK markets are gearing up for a data-rich week. In Tuesday and Wednesday, important labor market and inflation data will be released. These data will help assess when the Bank of England may start cutting rates.

Market participants expect only two quarter-point rate cuts during the year. This course of events might make the British pound vulnerable, especially if upcoming economic data is stronger than expected.

GBPUSD quotes are forming a new downtrend on the D1 timeframe.

In terms of wave analysis, the price is in the formation of the third descending wave on the H1 timeframe. The breakthrough of the top of the first wave at 1.2520 has already taken place. This indicates a potential strengthening of the downward momentum. The Bears Power indicator volumes (standard values) are in the negative zone, confirming the sell-side movement.

Signal:

The short-term outlook for GBPUSD is to sell.

The target is at the level of 1.2280.

Part of the profit should be taken near the level of 1.2380.

A stop-loss could be placed at the level of 1.2540.

The bearish trend is short-term, so trade volume should not exceed 2% of your balance.