Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.2450.
- Add a stop-loss at 1.2285.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.2350 and a take-profit at 1.2300.
- Add a stop-loss at 1.2435.
The GBP/USD exchange rate bounced back last week after the latest interest rate decisions by the latest Bank of England (BoE) and Federal Reserve decision. The pair roared back to a high of 1.2400 on Monday, the highest point since September 20th.
BoE and FOMC decisions
The Federal Reserve concluded its two-day monetary policy meeting on Wednesday. In the closely watched meeting, the bank decided to leave interest rates unchanged between 5.25% and 5.50%.
The Fed also hinted that it could continue hiking rates in the coming meetings. However, most analysts believe that the bank will maintain its rates in the current range. This view was supported by the latest US Non-Farm Payrolls (NFP) data.
The data revealed that the economy added 150k jobs in October, lower than the median estimate of 180k. The report was also weaker than the previous month’s 239k. Also, the unemployment rate rose slightly to 3.9% while the participation rate slipped.
The other important event was the latest Bank of England (BoE) interest rate decision. Like the Fed, the bank decided to leave rates intact at 5.25% for the second straight meeting. The bank also warned that the British economy will weaken for an extended period of time.
Therefore, like the Fed, analysts expect that the bank will maintain its interest rate unchanged for a while. Unlike the US, which is still growing, the UK is going through a rough patch. Inflation has remained above 6% while the IMF has warned that the economy will have the slowest growth in the G7.
There will be no major economic data from the United States and UK this week. Therefore, traders will focus on last week’s rate decisions and the bond market. US and UK bond yields have retreated in the past few days after these monetary policy meetings.
GBP/USD technical analysis
The GBP/USD exchange rate has made a strong rebound recently. It has risen above the descending trendline that connects the highest points since September 20th. The pair has jumped above the 25-day and 50-day Exponential Moving Averages (EMA).
It has also moved slightly above the second resistance of the Woodie pivot point while the MACD has moved above the neutral point. The Stochastic Oscillator has moved to the overbought point.
Therefore, the pair will likely continue rising as buyers target the third resistance of the Woodie Pivot point at 1.2460.
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