Bearish view
Bullish view
- Set a buy-stop at 1.2380 and a take-profit at 1.2480.
- Add a stop-loss at 1.2280.
The GBP/USD exchange rate continued rising after the strong UK inflation data and positive consumer confidence numbers from the US. It rose to a high of 1.2342, the highest level since February 2 of this year. It has jumped by ~4.62% from the lowest level this year.
UK inflation, US consumer confidence
America’s consumer confidence rose in March even as inflation remained at an elevated level. Data by Conference Board showed that the consumer confidence index rose slightly to 104.2 in March from 103.4 in February. The report also showed that the present situation index rose to 151.1 while the expectations index jumped to 73.
Consumer confidence is important data that has an impact on the Federal Reserve. Last week, the Fed decided to hike interest rates by 0.25% and pointed to more hikes in the coming months. Analysts at Blackrock, the biggest asset manager in the world, hinted that the bank has more hikes to implement.
The next key economic data to watch from the United States will be pending home sales numbers. Economists expect the data to show that home sales dropped by 2.3% in February after rising by 8.1% in January. Home sales have dropped as mortgage rates have jumped in the past few months.
Meanwhile, in the UK, data published on Tuesday shows that shop inflation rose to a record high in March. Numbers by the British Retail Consortium (BRC) showed that shop price inflation jumped by 8.9% in March.
In a statement, the Bank of England (BoE) governor hinted that the bank could continue hiking rates in the coming months. He also reiterated that the banking sector was safe following the collapse of key banks like Credit Suisse and Silicon Valley Bank.
GBP/USD technical analysis
The GBP/USD pair has been in a bullish trend in the past two weeks. It has moved above the 25-period moving average and the Ichimoku cloud. At the same time, the Relative Strength Index (RSI) and the MACD have formed a bearish divergence pattern. Further, the pair has formed a rising wedge pattern, which is nearing its peak.
Therefore, while the pair has some more upside, there is a likelihood that a bearish breakout will happen in the coming days. If this happens, the next key support to watch will be at 1.2200.
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