Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.2830.
- Add a stop-loss at 1.2680.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.2700 and a take-profit at 1.2612.
- Add a stop-loss at 1.2800.
The GBP/USD exchange rate bounced back after the relatively strong economic numbers from the UK and the United States. The pair rebounded to a high of 1.2770, much higher than last Friday’s low of 1.2612.
UK and US economic data
The GBP/USD pair rebounded after the strong UK housing numbers. According to Halifax, house prices continued rising in December, signaling that there is strong demand even as interest rates remains at the highest point in decades.
The average house prices increased by 1.1% in December and by 1.7% on a YoY basis. It was the third straight monthly increase. Additional data published by S&P Global showed that the country’s construction PMI rose to 46.8 in November.
While this was the best increase in three months, it remained below 50, meaning that the sector is contracting. Still, it is moving in the right trend. Additional data by the Bank of England showed that mortgage approvals rose to a five-month high of 50,100 in November.
As a result, UK bond yields continued rising this week as investors predicted that the BoE will maintain rates higher for longer. Yields of the 10-year UK government bonds rose to 3.83% while the 5-year jumped to 3.78%.
The GBP/USD pair also rose after the strong US jobs numbers. Data by the Bureau of Labor Statistics (BLS) revealed that the economy added over 216k in December, its biggest increase since September last year.
Additional data in the report showed that the unemployment rate remained unchanged at 3.7% in December while wages jumped by over 4%. These numbers, coupled with the rising shipping and oil prices, mean that the Fed could maintain rates higher for longer.
Economists see the first rate cut coming either in May or June. The Fed Rate Monitor tool has a 64% rate cut in March this year.
GBP/USD technical analysis
The GBP/USD pair has formed an ascending channel since November. This rebound happened after it retested the lower side of this channel. It has also remained above the 25-period and 50-period Exponential Moving Averages.
Further, the MACD and the Relative Strength Index (RSI) have ticked upwards in the past few days. Therefore, the pair will likely continue rising as bulls target the key resistance at 1.2825, the highest point on December 28th.
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