Bullish view
Buy the GBP/USD pair and set a take-profit at 1.3652.
Add a stop-loss at 1.3400.
Timeline: 1-2 days.
Bearish view
Sell the GBP/USD pair and set a take-profit at 1.3400.
Add a stop-loss at 1.3652.
The GBP/USD pair held steady and remained at a crucial resistance level ahead of crucial macro data from the United States and the United Kingdom, which may help to determine the next actions by the Federal Reserve and the Bank of England (BoE). It rose to 1.3510, its highest point since July 16.
US Inflation and UK GDP Data
The GBP/USD pair rose as the US dollar softened across the board after last week’s nonfarm payrolls (NFP) report. This report showed that the economy suffered job losses in July this year. It lost 23k jobs, missing the estimated additions of 85k.
The report signaled that the labor market is not all that strong. While the US has added over 716k jobs since Trump became president, it added over 2 million in the last two years of Joe Biden’s presidency.
The next important data to watch will be the US consumer inflation report, which is important as it forms the second part of the Federal Reserve’s role. Economists polled by Reuters expect the report to show that the annual inflation dropped slightly.
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Monthly inflation, however, is expected to rise slightly because gasoline prices jumped after the US and Iran resumed their fighting. A stronger-than-expected inflation report will raise the possibility that the Fed will hike interest rates later this year. This is in line with what the Cleveland Fed’s Beth Hammack predicted in a statement on Monday.
On the other hand, a softer inflation, coupled with the weak NFP data will reduce the possibility of the Fed hiking interest rates. Such a move would be bullish for the GBP/USD pair.
The GBP/USD pair will also react to the upcoming UK GDP, industrial, and manufacturing production report. These numbers will also be important as they will provide hints of what to expect from the Bank of England.
GBP/USD Technical Analysis
The GBP/USD pair has been in a strong uptrend in the past few days and is now at a crucial resistance level of 1.3510. This uptrend is gaining momentum as the Average Directional Index (ADX) has jumped to its highest level since July 16. A rising ADX is a sign that the trend is strengthening.
The pair has also formed an inverted head-and-shoulders pattern, a common bullish reversal sign. It also jumped above the 50-day moving average. Therefore, the pair will likely continue rising as bulls target the next key resistance level of 1.3652, its highest level on May 1.
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