GBP/USD, Oil Forecast: Two trades to watch
GBP/USD falls as dollar strengthens and risk aversion rises
GBP/USD is falling on Tuesday, giving back recent gains and trading around 1.3220 in early European trade, as a stronger US dollar and rising risk aversion weigh on the pair.
The US deadline for Iran to reopen the Strait or face military action has lifted oil prices to a monthly high, increasing inflationary pressures and pushing US Treasury yields higher.
This, in turn, reinforces expectations that the Federal Reserve will keep interest rates higher for longer, supporting the dollar.
On the data front, the ISM services PMI eased to 54.0 in March, down from 56.1 in February and below expectations of 55.0, signalling a modest slowdown in momentum.
Sterling is also under pressure as risk-off sentiment dominates, despite a more cautious tone from Bank of England policymakers.
Officials including Sarah Breeden and Swati Dhingra have shifted away from supporting rate cuts towards a more wait-and-see approach, reflecting concerns over rising energy prices.
The Bank of England has also warned that inflation could rise towards 3.0–3.5% in the coming quarters, complicating the policy outlook. However, the BoE would want to see underlying inflation rising before considering a rate hike. Furthermore, weak UK growth and a soft jobs market further complicate the backdrop.
Attention now turns to the upcoming UK PMI data, where:
- The services PMI is expected to hold at 51.2
- while the composite PMI is expected to edge lower to 51.0
Together, these readings point to sluggish but still positive growth, reinforcing the view of a fragile economic outlook.
GBP/USD forecast – technical analysis
GBP/USD trades in a descending channel from the January 1.3780 high to recent support at 1.3160. The price also trades below its 50 and 200 SMA.
Sellers will look to extend the bearish move below the 1.3150 -1.32 support zone towards 1.30, the psychological level and the November low.
Should the 1.3150-1.32 support zone hold, buyers will look to rise above 1.3340, the horizontal resistance and the upper band of the falling channel. Above here, the 200 SMA comes into focus at 1.3425.
Oil rises as geopolitical risk intensifies
Oil prices are rising on Tuesday, hitting a monthly high, after President Trump set an 8:00 PM deadline for Iran to reopen the Strait of Hormuz.
Trump has threatened to target bridges and power infrastructure if Iran fails to comply, raising fears of further escalation and increasing supply risk. Even in the event of a ceasefire, infrastructure damage could constrain output for months, keeping oil markets tight.
Hopes for a deal have faded after Iran rejected a proposed 45-day ceasefire, instead pushing for a permanent end to the war and resisting pressure to reopen the key waterway, which carries roughly 20% of global oil and LNG flows.
Trump has also warned that Iran could face severe military consequences if it fails to meet the deadline, reinforcing the risk of escalation.
As a result, oil remains highly headline-driven in the near term. Further escalation could see prices break above $120, while any credible peace deal could trigger a sharp pullback
Oil forecast - technical analysis
Oil prices continue to rise, extending gains towards 120 and a monthly high. The RSI has tipped into overbought territory, so buyers should be cautious.
Above 120, the next is 124.00, the June 2022 high, followed by 130, the March 2022 high.
Support is at 110.00 the round number and 105, the 23.6% Fib retracement of the 55.00 low and the 120.00 high. A break below here exposes the 100.00 round number and the 20 SMA at 97.00, which has guided the price higher.
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