Bearish view
Sell the GBP/USD pair and set a take-profit at 1.3300.
Add a stop-loss at 1.3450.
Timeline: 1-2 days.
Bullish view
Buy the GBP/USD pair and set a take-profit at 1.3450.
Add a stop-loss at 1.3300.
The GBP/USD pair was flat today, July 15, as traders reacted to Kevin Warsh’s first statement in Congress and the US consumer inflation report. It was trading at 1.3387 as focus remains on US inflation and the Federal Reserve’s next actions.
Federal Reserve and Bank of England Rate Hikes Odds
The GBP/USD pair wavered as traders focused on the next actions by the Federal Reserve and Bank of England (BoE). Analysts expect the two central banks to hike interest rates later this year as tensions between the US and Iran escalate.
The two countries have continued their bombing campaign this week, with traffic through the Strait of Hormuz falling to the lowest level in weeks. As a result, energy prices have continued rising, with Brent and WTI soaring by over 20% from the lowest level in June.
Rising energy prices may lead to a resurgence of inflation in the US. A report released on Tuesday showed that the headline and core inflation numbers dropped substantially in June. The headline CPI dropped to minus 0.1% in April, with the annualized figure falling to 3.8%.
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The US will publish the latest Producer Price Index (PPI) data later today, with the real figure expected to show that prices eased in June. Kevin Warsh, the new Federal Reserve Chairman, will testify in Congress.
As he did on Tuesday, chances are that he will remain muted on the next actions, insisting that the bank was still concerned about the elevated inflation.
The other key GBP/USD news will come out on Thursday when the UK publishes its macro data. Economists expect the upcoming report to show that the economy grew by 0.1% in May after contracting by 0.1% in the previous month.
GBP/USD Technical Analysis
The four-hour chart shows that the GBP/USD pair has remained in a tight trading range over the past few days. It continues to trade within an ascending channel, with the upper and lower trendlines connecting the successive highs and lows formed since July 2.
The challenge, however, is that the pair has formed a bearish divergence pattern as the Relative Strength Index (RSI) has continued falling. Therefore, this pattern suggests that the pair will have a bearish breakout in the near term. If this happens, the next key level to watch will be at 1.3300.
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