Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.2778.
- Add a stop-loss at 1.2680.
- Timeline: 1 day.
Bearish view
- Set a sell-stop at 1.2695 and a take-profit at 1.2600.
- Add a stop-loss at 1.2750.
The forex market has been a bit muted this week as most US investors and traders stayed in the sidelines due to the Independence Day holidays. The GBP/USD pair has been stuck between 1.2700 and 1.2750, a few points above last week’s low of 1.2591.
UK mortgage rates rise
The UK economy is underperforming its Western peers. It is the only country where inflation is rising. In a statement on Tuesday, Prime Minister Rishi Sunak warned that inflation was becoming more persistent than people expected.
He also said that higher interest rates by the Bank of England were taking longer to bring prices lower. As a result, he is now considering whether to endorse pay increases for public sector workers.
On the positive side, Sainsbury’s, one of the biggest retailers in the country said that food prices were starting to drop. In a statement, the company said that it was committed to passing those savings to customers, which could lower overall prices.
Meanwhile, fears of more rate hikes helped to push the average cost of a five-year fixed rate to 6%, the highest level since last year. At the same time, UK gilt yields have continued soaring as the Bank of England hiked rates to the highest level in 15 years.
The yield curve inversion is also happening in the United States, where the spread between the 2-year and 10-year bond yields has widened to the highest level in decades. The 10-year yield stands at 3.95% while the 2-year moved to 4.94%.
The main movers for the GBP/USD pair on Wednesday will be the upcoming minutes by the Federal Reserve and the services PMI numbers from the US and Europe. These numbers will come two days before the US is set to publish the June non-farm payrolls (NFP) data.
GBP/USD technical analysis
The GBP/USD price made a strong bullish comeback after dropping to 1.2591 on Friday. It has already flipped the important resistance at 1.2680 (May 10 high) into support. The pair is attempting to move above the Ichimoku cloud. It has jumped above the Woodie pivot point and the 50-period moving average.
Therefore, the pair will likely continue rising ahead or after the FOMC minutes. If this happens, the next resistance level to watch will be at 1.2770, the first resistance of the Woodie pivot point.
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