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Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.2350.
- Add a stop-loss at 1.2250.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.2240 and a take-profit at 1.2180.
- Add a stop-loss at 1.2325.
The GBP/USD price spiked to the highest point since December 14 as the US dollar index sell-off continued. It also rose after the spectacular UK jobs numbers. Focus now shifts to the upcoming UK inflation and US PPI and retail sales numbers. It was trading at 1.2250 on Wednesday morning, which was about 3.45% above the lowest point this year.
UK inflation and US retail sales data
The GBP/USD exchange rate has been in a bullish trend in the past few weeks. These gains continued on Tuesday after the UK published the latest jobs numbers. In a report, data by the Office of National Statistics (ONS) showed that the country’s unemployment rate remained unchanged at 3.7% in November.
The number of claimant count rose by just 19.7k in December while average earnings with bonuses rose by 6.4%. These numbers suggest that the Bank of England (BoE) has more room to continue hiking interest rates at least in the first half of the year.
The next key catalyst for the pair will be the upcoming UK inflation data scheduled for Wednesday. Economists polled by Reuters expect the data to show that the headline CPI dropped slightly from 10.7% in November to 10.5% in December. Core CPI is also expected to have dropped from 6.3% to 6.2%. These numbers will be much higher than those from the US where headline CPI moved to 6.5%.
The GBP/USD pair will also react to the latest retail sales data from the United States. Economists expect that sales dropped by 0.8% in December while core sales fell by 0.4%. Retail sales have been under pressure because of the relatively high-interest rates and elevated inflation. The US will also release the latest producer price index (PPI) data. It willa also react to statements by Fed officials like Raphael Bostic, James Bullard, and Patrick Harker.
GBP/USD forecast
The GBP/USD pair has been in a bullish trend in the past few days. It has formed an inverted head and shoulders pattern, which is usually a bullish sign. The pair has also formed an ascending channel shown in red. It has also moved above the 25-day and 50-day moving averages and the Ichimoku cloud.
Therefore, the pair will likely continue rising as buyers target the key resistance level at 1.2350. The stop-loss of this trade will be at 1.2220.
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