Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.2510.
- Add a stop-loss at 1.2350.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.2400 and a take-profit at 1.2300.
- Add a stop-loss at 1.2500.
It has been a busy week for the GBP/USD pair as the US and UK published the latest consumer and producer inflation data. The pair, which peaked at 1.2506 on Wednesday and then pulled back to the key support level at 1.2400.
UK and US economic data
The US published encouraging CPI and PPI data on Tuesday and Wednesday. According to the Bureau of Labor Statistics (BLS), the headline CPI dropped from 3.7% in September to 3.2% in October. Core inflation also retreated from 4.2% to 4.0%.
The US also released additional data on Wednesday. The headline PPI and core PPI fell to 1.3% and 2.4%, the lowest level in months. These numbers were weaker than the median estimates by analysts.
Another report revealed that retail sales dropped by 0.1% while core sales rose by 0.1%. Taken together, these numbers mean that the Federal Reserve will likely continue pausing its interest rate hikes in the coming months. Some analysts, including those from UBS, expect the bank will deliver several rate cuts in 2024.
Meanwhile, in the UK, the Office of National Statistics (ONS) revealed that the country’s inflation continued plunging. The headline CPI dropped from 6.7% in September to 4.6% in October. Core inflation also tumbled from 6.1% to 5.7%. These numbers were weaker than the median estimate of 4.8% and 5.8%, respectively.
The data means that the actions of the Bank of England (BoE) to lower inflation are working. Like the Federal Reserve, the bank has hiked rates to more than 5%. In a statement on Tuesday, the bank’s Chief Economist warned that it could still hike rates now that bond yields have retreated.
The next important GBP/USD news will be the upcoming initial and continuing jobless claims. Also, the US will release the latest industrial production and Philadelphia Fed manufacturing index data.
GBP/USD technical analysis
The GBP/USD exchange rate drifted downwards from this week’s high of 1.2506 to an intraday low of 1.2400. It has moved below the crucial support at 1.2460, the highest point on November 6th. The pair has also dropped below the 38.2% Fibonacci Retracement level.
It has also moved below the median line of the Andrew’s pitchfork tool. It has also moved above the 25-period and 50-period Exponential Moving Averages (EMA). Therefore, the outlook for the pair is still bullish, with the next point to watch being the YTD high of 1.2505.
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