On the last trading day of the previous week, the GBPUSD currency pair broke the resistance at the level of 1.3450 and rallied on reports of another escalation of the trade war, this time involving the European countries. It is worth noting that the market reaction was generally more subdued compared to the volatility of early April, when Trump had first announced the duties. Apparently, the market has already learned that the US administration's statements are nothing terrible, and they are usually retracted rather quickly. However, on small timeframes these statements are certainly contributing to the weakening of the US dollar and strengthening of other major reserve currencies and the British pound in particular, as the UK, among other things, has already signed an agreement with the US on minimally restrictive conditions.
Investor demand for the US dollar is declining amid concerns over Trump's chaotic tariff policy and the threat of a US government debt and budget crisis caused by tax reform plans. In this regard, the US dollar's position is quite negative against other major global currencies of the G10, as well as the currencies of emerging economies.
In terms of technical analysis, after the upward breakout of GBPUSD, the pair is highly likely to return to the breached level of 1.3450 and test it as a support.
Additional confirmation of the expected decline in GBPUSD may be the formed divergence with the RSI indicator, indicating a weakening momentum of the pair's upward movement, which increases the chances of a downward correction.
The overall recommendation is to sell GBPUSD.
The profit should be fixed at the level of 1.3450. A Stop loss could be set at the level of 1.3750.
The volume of the opened position should be set in such a way that the value of a possible loss, fixed with the help of a protective Stop loss order, is no more than 1% of your deposit funds.
This content is for informational purposes only and is not intended to be investing advice.
