Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.3600.
- Add a stop-loss at 1.1425.
- Timeline: 1-2 days.
Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.1425.
- Add a stop-loss at 1.3600.
The GBP/USD pair retreated slightly to the psychological point at 1.3500, down from last week’s high of 1.3595. It will be in the spotlight ahead of the upcoming UK Consumer Price Index (CPI) data and the Jackson Hole Symposium.
UK Consumer Price Index Data
The GBP/USD pair will be in focus as the Office of National Statistics (ONS) publishes the latest consumer inflation data. Economists expect the data to show that the headline CPI rose from 3.6% in June to 3.7% in July.
Similarly, the core CPI, which excludes the volatile food and energy prices, is expected to remain unchanged at 3.7%. The ONS will also publish the latest retail sales data.
These numbers will confirm the view that the UK is in stagflation, which is characterized by high inflation and slow economic growth.
As such, analysts and money market funds are betting that the BoE will maintain low interest rates unchanged at 4% for the rest of the year. This represents a significant shift, as these investors had been pricing in a cut later this year.
As a result, UK bond yields, popularly known as gilts, jumped, with the 10-year yield rising to 4.73%, the highest point since May. The two-year yield rose to 3.97%.
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The next important GBP/USD news will be the upcoming statement by Michele Bowman, a senior Fed official. Like Christopher Waller, she has been an advocate for cutting interest rates, a sentiment she will advocate in her speech.
The US will publish the latest data on housing starts and building permits, providing more information on the housing sector. The main catalyst for the pair will be the upcoming Jackson Hole Symposium in which Jay Powell will share his views on the economy.
GBP/USD Technical Analysis
The daily chart shows that the GBP/USD pair has jumped in the past few days, moving from a low of 1.3136 to the current 1.3500. It has crossed the important resistance level at 1.3425, its highest point in September last year.
The pair’s 50-day and 25-day Exponential Moving Averages (EMA) have crossed each other. It has also formed a small inverse head-and-shoulders pattern.
The Awesome Oscillator has moved above the zero line and is hovering at the highest point since July 7. Therefore, it will likely continue rising as bulls target the key resistance at 1.3600.
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