Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.3000.
- Add a stop-loss at 1.1950.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.1980 and a take-profit at 1.1900.
- Add a stop-loss at 1.2050.
The GBP/USD price surged to the highest level since June 27 as the US dollar weakness continued. It rose to a high of 1.2285, which was about 18.8% above the lowest level this year. It also jumped after the relatively strong American jobs data.
US dollar retreat continues
The GBP/USD price rallied as investors reflected on the strong jobs numbers. According to the Bureau of Labor Statistics (BLS), the economy added 263k jobs in November as the labor market continued. The economy’s job increases have averaged 282k in the past three months.
Meanwhile, the unemployment rate remained unchanged at 3.7%, which is slightly above its historical low. Further, the average hourly earnings grew by 5.1%, which is a sign that the labor market is still tightening.
These numbers came at a time when many technology companies have announced large-scale layoffs. Twitter recently shed over 3,700 jobs while firms like Amazon, Alphabet, and Meta Platforms have announced thousands of layoffs.
Therefore, following the strong jobs numbers, most analysts expect the Federal Reserve to continue hiking interest rates by 0.50% in its December meeting. This is in line with last week’s statement by Jerome Powell, the Fed chair.
The GBP/USD pair also reacted to the statement by a Bank of England (BOE) official. In a statement, Swati Dhingra, saud that interest rates will continue rising amid the rising risk of a deeper and longer recession.
Swati has been a cautious rate setter recently. In the last meeting, she voted to increase rates by 50 basis points while other officials voted for a 0.75%.
The next key data to watch on Monday will be the upcoming services PMI numbers from the UK and the US. Economists expect the data to show that the two PMIs were at 48.8 and 53.1, respectively.
GBP/USD forecast
The daily chart shows that the GBP/USD price has been in a strong bullish trend in the past few days. As it rose, the pair moved above the ichimoku cloud and the 25-day and 50-day moving averages. Oscillators like the Relative Strength Index (RSI) and the Stochastic Oscillator moved above the overbought level.
It has also formed an inverted head and shoulders pattern. Therefore, the pair will likely continue rising as buyers target the next key resistance level at 1.3000. A drop below the support at 1.1900 will invalidate the bullish view.
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