Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.2000.
- Add a stop-loss at 1.2200.
- Timeline: 1-3 days.
Bullish view
- Set a buy-stop at 1.2165 and a take-profit at 1.2250.
- Add a stop-loss at 1.2100.
The GBP/USD exchange rate remained in a tight range in the past few days as traders wait for the upcoming Federal Reserve and Bank of England (BoE) interest rate decisions. The pair was trading at 1.2121 on Monday morning, a few points above last week’s low of 1.2070.
Fed and BoE rate decisions
This will be an eventful week for the GBP/USD pair as the Fed and BoE make their interest rate decisions. The Fed will deliver its interest rate decision on Wednesday, which will set the tone for what to expect in the coming meetings.
The decision will come at an important time for the market and the economy. Inflation remains stubbornly high, as evidenced by last week’s personal consumer expenditure (PCE) data. The report showed that the PCE inflation rose to 3.7% in September.
At the same time, the bond market has been in turmoil, with the 30-year and 10-year bond yields sitting a 5.018% and 4.8%, respectively. These yields have risen to the highest level in more than a decade.
Other leading indicators are painting a worrying picture of the economy. Credit card delinquencies have jumped while mortgage rates have soared to the highest point in more than two decades. Therefore, economists believe that the Fed will leave interest rates unchanged.
The Bank of England will then deliver its rate decision on Thursday. Like the Fed, economists expect the bank will leave interest rates unchanged. It will also downgrade its estimate of the British economy. The GDP growth has been weaker while the unemployment rate is higher while pay growth has eased.
The other important data will come out on Friday when the US publishes the latest non-farm payrolls (NFP). These numbers will show whether the labor market is still doing well.
GBP/USD technical analysis
The GBP/USD pair has been in a consolidation phase in the past few days. As a result, the Average True Range (ATR) has dropped to the lowest level since September 29th. The ATR is one of the most accurate indicators of volatility in the market. At the same time, the Average Directional Index (ADX) has fallen to its lowest point since October 11th.
The pair is also consolidating at the 50-period and 25-period moving averages. It has formed a symmetrical triangle pattern. Therefore, on Monday, the pair will likely continue consolidating as traders wait for the upcoming rate decisions.
Ready to trade our free daily Forex trading signals? We’ve shortlisted the best UK forex broker in the industry for you.