GBPUSD loses ground amid dollar strength and revised Fed expectations

The GBPUSD fell on Tuesday, as an unexpected rise in US manufacturing activity lowered market expectations for an imminent interest rate cut by the Federal Reserve (Fed).


On Monday, the US released data from the Institute for Supply Management (ISM) on manufacturing activity in the country. The index rose to 50.3 points for the first time since September 2022.


Against this backdrop, the probability of a Fed rate cut in June in the US futures market fell to 57% from 70.1% last week. This is according to data from CME Group’s FedWatch tool. 


New US employment data due on Friday will give the market more information on the state of the economy and the Fed’s potential moves.


Meanwhile, inflationary pressures in the UK are easing. According to the BRC, shop prices fell to 1.3% from 2.5% in February, the smallest annual rise since December 2021. Food prices rose 3.7%, down from 5.0%, while non-food prices rose just 0.2%, slowing from 1.3% in February.


The Bank of England expects the country’s inflation rate to fall below 2% between April and June, increasing the chances of a rate cut in June.


The GBPUSD rate is forming a new downtrend on the D1 timeframe.


In terms of wave analysis, the price is in the formation of the third bearish wave on the H1 timeframe. The breakdown of the top of the first wave at 1.2575 has already occurred. This indicates a potential strengthening of the downward momentum. The volume of the Bears Power indicator (standard readings) is in the negative zone, confirming the sell-side movement.



Short-term prospects for GBPUSD suggest selling

The target is at the level of 1.2360.

Part of the profit should be taken near the level of 1.2460.

A stop-loss could be placed at the level of 1.2650.

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

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