Bullish view
Buy the GBP/USD pair and set a take-profit at 1.3430.
Add a stop-loss at 1.3285.
Timeline: 1-2 days.
Bearish view
Sell the GBP/USD pair and set a take-profit at 1.3285.
Add a stop-loss at 1.3430.
GBP/USD pair surged to its highest point since September 16 after the UK published another strong jobs report, confirming that the economy was doing well. Sterling jumped to 1.3400, up by nearly 2% from its lowest level this month.
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UK to Publish Inflation Report
The GBP/USD pair has rebounded after the UK published encouraging macro data. A report released earlier this month showed that GDP grew at a faster pace than expected.
Another report released on Wednesday showed that the economy created 102k jobs in the three months to August, much higher than the expected 20k. It was a bigger increase than the previously released 67k. Wage growth, excluding bonuses, rose 3.7% in August, higher than the expected 3.6%.
The next important macro data to watch will be the UK inflation report. Economists expect the upcoming report to show that the headline Consumer Price Index (CPI) rose 3.4% in September, higher than the previous 3.1%. Core inflation, which excludes the volatile food and energy prices, is expected to jump 2.8%.
If the real numbers are in line with expectations, it will increase the possibility of the Bank of England hiking interest rates at its meeting next month. If this happens, it will bring rates to 4.0%, the highest level in over a year. Odds of a BoE rate hike has jumped to 94%.
In contrast, most analysts believe that the Federal Reserve will leave interest rates unchanged in its next week. Recent data showed that headline US consumer inflation remained further away from the Fed’s target of 2.0%. Another report showed that the economy created just 29k jobs last month.
GBP/USD Technical Analysis
The daily chart shows that the GBP/USD pair has rebounded in the past few days. It moved from a low of 1.3135 on October 14 to 1.3400 on Tuesday. It has moved above the psychological level of 1.3300.
The Relative Strength Index (RSI) has jumped above the neutral level of 50 and is currently at 56. It has jumped to its highest level since August 27. It has also risen above the 50-day Exponential Moving Average (EMA).
Therefore, the pair will likely continue rising as bulls target the major S/R pivot point of the Murrey Math Lines tool at 1.3430. A move above that level will point to more gains, potentially to the psychological level of 1.3500.
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