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MENAFN- Daily Forex) Bearish view
Sell the GBP/USD pair and set a take-profit at 1.2365. Add a stop-loss at 1.2725. Timeline: 1-2 days.
Bullish view
Set a buy-stop at 1.2625 and a take-profit at 1.2700. Add a stop-loss at 1.2550.
The GBP/USD pair has bounced back this month and risen for four consecutive days as the US dollar strength eased. It jumped to a high of 1.2625 on Monday morning, up sharply from the year-to-date low of 1.2105. Focus now shifts to the upcoming UK economic data that will provide hints about what to expect from the Fed.
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The GBP/USD pair rose even after the US released strong economic numbers on Wednesday. A report by the Bureau of Labor Statistics revealed that the headline consumer price index rose to 3.0% in January, continuing to move further from the Federal Reserve target of 2.0%. Core inflation rose to 3.3% during the month.
These numbers came as Jerome Powell was testifying in Congress. In his statement, he insisted that the Federal Reserve would maintain higher interest rates for longer. He expects to start cutting interest rates when inflation demonstrates that it is falling and moving towards the 2% target. Economists expect the bank to cut rates later this year.
The GBP/USD pair will be in the spotlight this week as the UK publishes several important economic numbers. The Office of National Statistics (ONS) will publish the latest jobs numbers on Tuesday followed by the closely watched inflation report on Wednesday.
Economists expect the data to show that the headline consumer price index (CPI) rose from 2.5% in December to 2.6% in January. Core inflation is expected to move from 3.2% to 3.3% in January. The agency will publish the latest retail sales data on Friday.
These numbers come two weeks after the Bank of England (BoE) delivered another 0.25% rate cut and signaled that more were coming.
EURUSD Chart by TradingViewGBP/USD technical analysis
The GBP/USD exchange rate continued rising and reached a high of 1.2625, a notable level since it aligned with the 38.2% Fibonacci Retracement level. It has moved above the key resistance level at 1.2400, a psychological point, and the 23.6% retracement level.
The pair has moved slightly above the 50-day moving average, while the Commodity Channel Index (CCI) has moved to the overbought level. At the same time, the money flow index (MFI) and the Average Directional Index (ADX) have tilted downwards, a sign that it has formed a bearish divergence.
Therefore, the pair may retreat and retest the support at 1.2360 and resume the uptrend later this week.
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