Bullish view
Buy the GBP/USD pair and set a take-profit at 1.3650.
Add a stop-loss at 1.3450.
Timeline: 1-2 days.
Bearish view
Sell the GBP/USD pair and set a take-profit at 1.3450.
Add a stop-loss at 1.3650.
The GBP/USD pair jumped to its highest level since May this year, continuing an uptrend that started in June when it bottomed out at 1.3139. It was trading at 1.3545 as traders waited for key macro events from the UK and the United States.
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UK Macro Data and FOMC Minutes
The GBP/USD pair continued rising this week as traders waited for some notable macro data from the UK and the US. The most important ones will be numbers from the UK, where the Office of National Statistics (ONS) will release the latest jobs numbers.
Economists expect the data to show that the unemployment rate retreated to 4.8% in June from the previous 4.9%. However, the average earnings index is expected to retreat from 4.3% in May to 4.0% in June.
The other key report will come out on Wednesday, when the US will release the latest consumer and producer inflation report. Economists expect the headline consumer inflation to move from 2.6% in June to 2.5%. The core CPI is also expected to have moved from 2.6% to 2.4%.
Finally, the ONS will release the July retail sales data on Friday, shedding more color on the state of the British consumer. All these numbers will help the Bank of England when making its interest rate decision later this year. Odds of the Bank of England (BoE) hiking interest rates later this year have dropped to 28%.
The GBP/USD pair will next react to the upcoming US building permits and housing starts, which will come out later today. After that, the most important catalyst will be the upcoming Federal Reserve minutes, which will provide more information about the last meeting.
GBP/USD Technical Analysis
The daily chart shows that the GBP/USD pair has been in a strong upward trend in the past few weeks. It has moved above the 50-day moving average, a sign that bulls are in control for now.
The pair has formed an inverted head-and-shoulders pattern, a popular bullish reversal sign in technical analysis. Also, the Relative Strength Index (RSI) has continued rising.
Therefore, the most likely scenario is where the pair continues rising, with the next key target being at 1.3655, its highest level since May this year. However, with the expected data and events, the pair will likely be highly volatile.
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