More downside will be confirmed if the price moves below the support level at 1.2980, which was the lowest level this month.
Set a sell-stop at 1.2970 and a take-profit at 1.2900.Add a stop-loss at 1.3050.Timeline: 1-2 days.
Set a buy-stop at 1.3020 and a take-profit at 1.3100.Add a stop-loss at 1.2950.
The GBP/USD pair is trading at an important support level as investors reflected on the strong warning by the IMF about the US economy. It is trading at 1.300, which is both an important support level and also the lowest it has been this year.
UK Economy Is at Risk
The IMF made headlines on Tuesday when it delivered the latest economic forecasts. The agency now expects that the global economy will grow by just 3.6% this year. That outlook was slightly lower than where inflation is currently. It blamed the situation on the ongoing crisis in Ukraine.
The GBP/USD pair moved sideways after it warned about the UK economy. According to the IMF, the UK faces the worst inflation shock among all major advanced economies in the coming two years.
It expects that the UK economic output will be about 1% smaller in 2022 and 2023 than its forecast in January. It pointed to the rising cost of living and slowing investments in the country. Notably, its 2023, it expects that the UK economy will grow more slowly than other G7 countries. However, it is worth noting that IMF forecasts are not always accurate.
The GBP/USD pair is also wavering after the US published strong housing starts and building permits data. The data revealed that building permits rose from 1.865 million to 1.873 million. In the same period, housing starts rose from 1.78 million to 1.79 million. These numbers shows that the housing sector in the United States is still strong.
The US will publish the latest existing-home sales data on Wednesday. Economists expect the data to show that existing home sales dropped from 6.02 million to 5.80 million in March. Still, these numbers will not have a major impact on the GBP/USD pair.
The GBP/USD pair has been in a tight range in the past few days. It is hovering around the 1.300 support level. As a result, the pair is trading slightly below the 25-day moving average. It is also between the middle and lower lines of the Donchian channels while the MACD has moved below the neutral level.
Therefore, more downside will be confirmed if the price moves below the support level at 1.2980, which was the lowest level this month. If this happens, the next support level will be at 1.2900.