Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.2770.
- Add a stop-loss at 1.2625.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.2690 and a take-profit at 1.2600.
- Add a stop-loss at 1.2770.
The GBP/USD exchange rate was flat on Wednesday in a market characterized by low volume and no major news. The pair was stuck at 1.2705, where it has been in the past few days. This price is a few points above where it started the month at.
BoE and Fed outlooks
The GBP/USD pair has remained in a tight range as traders assess the next actions by the Bank of England (BoE) and the Federal Reserve. On the one hand, the Fed has pointed to three rate cuts in 2024.
This case was strengthened by last week’s PCE data. According to the BEA, the headline and core PCE dropped in November and are slowly moving towards the bank’s target of 2.0%. There is a likelihood that inflation continued falling as energy prices retreated. The average gasoline price dropped to $3.12, down from $3.25 a month ago.
Therefore, economists are now expecting the first Fed rate cut to come as soon as March next year. The Fed Rate Monitor tool estimates that the bank will deliver at least four rate cuts.
This view is supported by the performance of the US Treasuries market. The most recent data shows that the 10-year Treasury yield slipped to 3.90% while the 30-year retreated to 4.05%. The two bond yields had peaked at over 5% this year.
Meanwhile, the GBP/USD pair moved sideways as traders reflected on the actions of the Bank of England. Like the Fed, the BoE decided to leave interest rates unchanged at 5.25%.
However, it also warned that rates could remain at an elevated level for a while, a move that has been criticized by some economists. Besides, data showed that the headline consumer price index (CPI) dropped to 3.9%.
GBP/USD technical analysis
The GBP/USD pair has moved sideways in the past few days. On the 4H chart, the pair moved slightly above the Woodie pivot point. It has also remained slightly above the 25-period and 50-period moving averages.
The pair has risen above the first support of the Andrews pitchfork tool while the Relative Strength Index (RSI) is above the neutral point. Therefore, with no major news expected on Wednesday, and with volume expected to remain low, the pair will likely remain in this range. The key support and resistance points to watch will be at 1.2650 and 1.2773.
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