Bullish View
- Buy the GBP/USD pair and set a take-profit at 1.2800.
- Add a stop-loss at 1.2675.
- Timeline: 1-2 days.
Bearish View
- Set a sell-stop at 1.2730 and a take-profit at 1.2650.
- Add a stop-loss at 1.2830.
The GBP/USD pair held steady on Thursday morning ahead of the upcoming US Consumer Price Index (CPI) data. It was trading at 1.2740, a few pips above this week’s low of 1.2688. Bulls are attempting to retest last month’s high of 1.2828.
US Inflation Data Ahead
The GBP/USD pair continued rising as the US dollar index (DXY) retreated. The index, which tracks the US dollar against a basket of currencies, dropped to $102.10. At the same time, the VIX index retreated to $12.7 as traders embraced a risk-off sentiment.
US equities rose, with the Dow Jones and the Nasdaq 100 index rose by 178 points and 125 points, respectively. In the same period, the 10-year bond yield dropped to 4% while the 30-year fell to 4.16%.
This price action happened as traders waited for the upcoming US inflation numbers, which will set tone for the next actions by the Fed. Economists polled by Reuters expect the data to show that inflation rose to 3.2% in December.
Core inflation, which excludes volatile food and energy products, is expected to retreat from 4.0% to 3.0%. Most economists believe inflation will hit the bank’s target of 2.0% later this year if this trend continues.
This report will come a few days after the US published encouraging jobs numbers. According to the Bureau of Labor Statistics (BLS), the economy added over 200k jobs in December while the jobless rate remained at 3.7%. Wages continued rising in December.
Therefore, this inflation report will set the tone for the next Federal Reserve actions. In a statement on Wednesday, Fed’s John Williams said that interest rates will remain higher for a while.
GBP/USD Technical Analysis
The GBP/USD pair has been in an uptrend in the past few days. On the 4H chart, the pair moved above the key resistance point at 1.2732, the highest swing on November 29th. It has also risen above the 50-period Exponential Moving Average (EMA). The Relative Strength Index (RSI) has crossed the neutral point of 50.
The pair has also moved above the Ichimoku cloud, which is a bullish sign. Therefore, the pair will likely continue rising as traders target the psychological level at 1.2800. A drop below the support at 1.2700 will invalidate the bullish view.
Ready to trade our free daily Forex trading signals? We’ve shortlisted the best UK forex broker in the industry for you.