Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.3200.
- Add a stop-loss at 1.3400.
- Timeline: 1-2 days.
Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.3400.
- Add a stop-loss at 1.3200.
The GBP/USD pair pulled back last week after the UK and the US published their September inflation numbers. It also dropped after the better-than-expected retail sales data. It was trading at 1.3310, its lowest level since October 15, and 3% from its highest point this year.
Federal Reserve Interest Rate Decision
The GBP/USD exchange rate pulled back after the UK published strong inflation and retail sales data. According to the Office of National Statistics (ONS), the headline Consumer Price Index (CPI) held steady at 3.8% in September, higher than the median estimate of 3.7%.
Worse, another data by YouGov showed that inflation expectations rose to the highest point since April. Another report showed that the country’s retail sale rose by 0.5% in September as Britons rushed to buy the recently-launched iPhones and gold. Sales rose to the highest level in three years.
Therefore, there is a likelihood that the Bank of England will maintain interest rates unchanged in the upcoming meeting. Cutting rates will likely lead to more inflationary pressure.
Top Forex Brokers
Looking ahead, focus will be in the United States where the Conference Board will publish the latest consumer confidence report. Most importantly, the Federal Reserve will cut interest rates in the coming meeting.
Odds of Fed cuts rose after the Bureau of Labor Statistics (BLS) published the latest inflation numbers. This report showed that the headline Consumer inflation rose to 3%, lower than the median estimate of 3.1%.
The GBP/USD pair will also react to the upcoming talks between Donald Trump and Xi Jinping. The two leaders will aim to provide more clarity and reduce trade tensions.
GBP/USD Technical Analysis
The daily chart shows that the GBP/USD pair has pulled back from the September high of 1.3725 to the current 1.3310. It formed a double-top pattern at 1.3725 and a neckline at 1.3141.
The pair has moved below the 50-day and 25-day Exponential Moving Averages. It has also moved below the Supertrend indicator, a sign that the bearish trend is continuing.
The Relative Strength Index and the MACD have continued falling. Therefore, the pair will likely continue falling as sellers target the key support at 1.3141. A move above the 25-day moving average at 1.3400 will invalidate the bearish view.
Ready to trade our free trading signals? We’ve made a list of the best UK forex brokers worth using.