Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.2845.
- Add a stop-loss at 1.2700.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.2725 and a take-profit at 1.2650.
- Add a stop-loss at 1.2850.
The GBP/USD was flat on Wednesday as investors reacted to the strong US consumer confidence and housing numbers. It was trading at 1.2750, where it has been since Friday. This price is a few pips below the year-to-date high of 1.2845.
Powell and Bailey's statements ahead
The most important news on Wednesday will be the statements by Jerome Powell of the Federal Reserve and Andrew Bailey of the Bank of England (BoE). In his statement, Powell will likely reiterate his previous view that the bank has room for more rate hikes ahead.
This view is now being supported by encouraging economic data from the US. Data published on Tuesday showed that consumer confidence bounced back in June. It rose to 109.7 in June as consumer inflation eased during the month and the unemployment rate remained low.
The US housing market is also doing well. The closely watched house price index rose in April while new home sales jumped by 12.2% in May. It rose to a seasonally-adjusted level of 763k during the month. Last week, additional data showed that housing starts and building permits are doing well. Therefore, the Fed will likely hike rates by 0.25% in July.
The GBP/USD pair will also react to the latest statement by Andrew Bailey, the head of the Bank of England. Unlike the Fed, the BoE is in a more difficult situation since the British economy is slowing while inflation remains stubbornly high. Therefore, the bank will likely continue hiking rates in the coming meetings.
There will be no economic data from the US and the UK on Wednesday. Therefore, traders will also continue to focus on the situation in Russia, where the government faced a brief rebellion during the weekend. It seems like these risks have faded.
GBP/USD technical analysis
The GBP/USD pair drifted upwards but remained in the same range where it has been at in the past few days. It has moved above the important support level at 1.2678, the highest level on May 10th. The pair has also moved above the 50-period moving average and the Ichimoku cloud indicator. At the same time, the Relative Strength Index (RSI) has moved above the neutral point of 50.
Therefore, because of the cup and handle pattern, the pair will likely continue rising as buyers target the resistance at 1.2845.
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