GBP/USD Forex Signal Today 08/05: Bullish Pennant (Chart)

(MENAFN- Daily Forex) Bullish view

• Buy the GBP/USD pair and set a take-profit at 1.3500.
• Add a stop-loss at 1.3250.
• Timeline: 1-2 days.

Bearish view

• Sell the GBP/USD pair and set a take-profit at 1.3250.
• Add a stop-loss at 1.3500.

The GBP/USD exchange rate wavered after the Federal Reserve delivered its May interest rate decision and warned about the potential macro risks in the economy. It was trading at 1.3333 on Thursday morning as traders turned their focus to the upcoming Bank of England (BoE) decision.

Top Forex Brokers1 Get Started 74% of retail CFD accounts lose money Bank of England decision ahead

The GBP/USD pair remained in a tight range after the Fed defied Donald Trump again and left interest rates unchanged at 4.50%. In the accompanying statement, officials warned of the uncertainty in the US economy after Trump implemented sweeping tariffs last month.

The US is now charging a baseline tariff of 10% on most imported goods, with vehicles, steel, and aluminium products having a 25% rate. Most imports from China are being charged a 145% tariff, in which some administration officials have called an embargo.

Therefore, the Fed warned that risks of higher unemployment rate and inflation have risen since the last meeting in May. Economists are largely mixed on the number of cuts to expect this year, with some predicting two 0.25% cuts.

The main news on Thursday will come from the UK, where the Bank of England will also conclude its two-day meeting. Unlike the Fed, analysts see the bank slashing rates by 0.25% and hinting of more to come.

The BoE hopes that its first interest rate cut of the year helping consumers and businesses by making borrowing costs cheaper. Its recent economic data showed that UK's inflation dropped to 2.6% in March from 2.8% in February. It has dropped for two consecutive months.

EURUSD Chart by TradingViewGBP/USD technical analysis

The GBP/USD pair has wavered in the past few days, halting the 9% surge from its lowest level this year. This consolidation is happening for three main reasons. First, it is happening after it retested the important resistance level at 1.3431.

Further, it is happening as part of the bullish pennant pattern, which is made up of a vertical line and a triangle pattern. Finally, the pair is slowly forming the handle section of the cup and handle pattern.

The two line of the triangle pattern are about to converge, meaning that a bullish breakout may happen soon. If this happens, the first level to watch will be at 1.3430, followed by more gains to the psychological point at 1.3500. A move below the support at 1.3223 will invalidate the bullish outlook.

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