Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.0780.
- Add a stop-loss at 1.1235.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.1172 and a take-profit at 1.1250.
- Add a stop-loss at 1.1100.
The GBP/USD price tilted upwards even as concerns about the UK economy continued. It rose to a high of 1.1140, which was the highest level since October 11 of this year ahead of the upcoming US inflation data.
Concerns about the UK remain
Fears about the collapse of the UK economy have been going on in the past few weeks. The challenge started when the new government unveiled its mini-budget that had over 45 billion in tax cuts. Since then, the government’s attempts to shift the tone have failed to appease investors.
As a result, the Bank of England (BoE) has been forced to make significant interventions in the bond market. It bought long-dated bonds worth over 4.56 billion pounds on Wednesday. That brought the total purchases in the current scheme to about 13 billion pounds.
The bank is under pressure to prevent a complete meltdown in the bond market. This situation worsened when the bank said that it would end the interventions on Friday of this week. A report by the FT then said that the bank had committed to some lenders to extend the facilities for a while.
The GBP/USD price rose slightly after the Bank of England Chief Economists warned that interest rates will jump substantially in the near term. Some analysts believe that the bank will deliver an emergency 100 basis point hike before its official meeting in November.
The next key catalyst for the GBP/USD price will be the upcoming US inflation numbers that will come out on Thursday. These numbers are expected to show that inflation remained at an elevated level in September. Analysts believe that the headline CPI rose by 8.5% while core inflation rose by 6.5%.
These numbers will come a day after the Federal Reserve published its minutes. These minutes showed that the bank will continue hiking rates in the coming weeks.
GBP/USD forecast
The three-hour chart shows that the GBP/USD price pulled back after falling to a low of 1.094. This was an important level since it was along the first support of the standard pivot point. It has moved slightly above the 25-day moving average while the MACD is pointing upwards.
The pair will likely resume the downward trend as sellers target the second support at 1.0780. The stop-loss of this trade is at 1.1225.
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