Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.2285.
- Add a stop-loss at 1.2050.
- Timeline: 1 day.
Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.1930.
- Add a stop-loss at 1.2230.
The GBP/USD price is hovering near the highest level since December 21st ahead of the important American inflation data. It was trading at 1.2156, which was slightly below this week’s high of 1.2200. It has been in a slow upward trend after the US published the latest jobs numbers last Friday.
US inflation data
The GBP to USD price has been in an upward trend in the past few days as the market reacted to the US jobs data. These numbers revealed that the country’s unemployment rate dropped to 3.5% in December, lower than the previous 3.7%. The economy added over 223k jobs during the month, which is a sign that the Fed has achieved its mandate on jobs.
Therefore, market participants will be focusing on the inflation part. The Bureau of Labor Statistics will publish the latest inflation data on Friday. Expectations are that consumer prices continued falling in December.
The median estimate of economists polled by Reuters is that the headline inflation dropped from 7.1% in November to 6.5% in December. On a month-on-month basis, analysts believe that inflation fell from 0.1% to 0.0%. Core inflation, on the other hand, is expected to have inched upwards on a month-on-month basis.
Most traders will also focus on the composition of inflation. Recent data has shown that core goods inflation has moved to the negative zone while core services inflation has soared. Energy prices are all over the map, with natural gas prices slumping to the lowest level since 2021. The average gasoline price in the US has remained at about $3.2 in the past few weeks.
The other important catalyst for the GBP/USD pair is the ongoing strikes in the UK. More than 100k civil servants will strike on February 1 as they complain about soaring inflation. These strikes could push the UK to a steeper recession.
GBP/USD forecast
The 4H char shows that the GBP/USD pair made a bullish breakout above the upper side of the descending channel shown in black. It is trading slightly below the first resistance of the traditional pivot points. The pair has moved slightly above the 25-day and 50-day moving averages. At the same time, the Relative Strength Index (RSI) has moved above the neutral point.
Therefore, the pair will likely have a bullish breakout as buyers target the key resistance at 1.2230. The stop-loss of this trade will be at 1.2050.
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