Advertisement
Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.2650.
- Add a stop-loss at 1.2550.
- Timeline: 1 day.
Bearish view
- Set a sell-stop at 1.2560 and a take-profit at 1.2450.
- Add a stop-loss at 1.2450.
The GBP/USD pair moved sideways after the Federal Reserve decided to hike interest rates on Wednesday. The pair was trading at 1.2560 as focus now shifts to the upcoming monetary policy meeting by the Bank of England (BOE) and the latest US jobs numbers.
Federal Reserve decision
The Federal Reserve continued with its tightening process on Wednesday as the bank continues to fight the sticky consumer inflation. In a statement, the bank decided to hike interest rates by 0.25% as most analysts were expecting. It also committed to continue with its quantitative tightening process by reducing its balance sheet by over $90 billion per month.
The Fed hinted that its rate hiking cycle has ended by scrapping its previous guidance that "some additional policy firming may be appropriate to bring inflation down." Data published in March showed that the headline consumer price index dropped to 5.0% in March from last year's high of 9.1%. The rate is significantly higher than the Federal Reserve's target of 2.0%.
In a press conference, Fed's Jerome Powell warned that the economy is going through challenges in the banking sector, where several lenders have collapsed while others are on the verge. As a result, he said that future policy will depend on how the situation unfolds.
The next key catalyst for the GBP/USD pair will be the upcoming US non-farm payrolls (NFP) data set for Friday. These numbers are expected to show that the labour market remained strong in April. On Wednesday, data by ADP showed that the private sector added over 296k jobs in April.
The Bank of England (BOE) will also conclude its meeting next week. Like the Fed, the bank is expected to hike interest rates by 0.25% since the British economy is seeing high inflation rate. The country's inflation has remained above 10% despite the tightening process of the BOE.
GBP/USD technical analysis
The GBP/USD pair has been in an upward trend after bottoming at 1.1800 in March. It reached a high of 1.2596 after the Fed decision. It has moved above the 50-period moving average and the ascending trendline is shown in blue. The Stochastic oscillator has moved to the overbought level.
Therefore, it seems like bulls are prevailing, which could see it move above the highest point this year. If this happens, the next level to watch will be at 12650.
Ready to trade our free trading signals? We’ve made a list of the best UK forex brokers worth using.