Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.2700.
- Add a stop-loss at 1.2830.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.2780 and a take-profit at 1.2850.
- Add a stop-loss at 1.2700.
The GBP/USD exchange rate remained in a tight range after last week’s positive UK GDP and US inflation numbers. It was trading at 1.2752 on Monday morning ahead of a busy week where geopolitics, earnings, and UK economic numbers will dominate.
UK jobs, inflation, and retail sales ahead
The GBP/USD pair moved sideways after the US released stronger-than-expected inflation numbers. According to the Bureau of Labor Statistics (BLS), the headline Consumer Price Index (CPI) rose from 3.1% in November to 3.4% December while core CPI dropped to 3.8%.
These numbers were higher than expected and were driven buy the housing sector, which is going through a period of low inventories. There are chances that inflation will remain higher for a while now that the price of crude oil has risen in the past few weeks as the crisis in the Middle East escalates. Shipping costs have also escalated, with the World Container Index rising to over $3,000.
These numbers came a week after the US published another strong jobs numbers. In it, the Bureau of Labor Statistics (BLS) said that the economy added over 200k jobs in December while the unemployment rate remained at 3.7%.
Taken together, the strong US inflation and jobs numbers means that the Federal Reserve will likely not start cutting rates in March. In a statement on Sunday, Raphael Bostic, the head of the Atlanta Fed, warned that inflation slowdown will moderate.
Looking ahead, the next important GBP/USD news will come from the UK. On Tuesday, the Office of National Statistics (ONS) will publish the latest jobs numbers. It will then release the inflation report on Wednesday followed by retail sales on Friday. These numbers will also help to set the tone for what to expect from the Bank of England (BoE).
GBP/USD technical analysis
The GBP/USD pair reacted mildly to the US inflation and UK GDP numbers. It has remained in a tight range in the past few days and moved slightly above the 50-period moving average.
The pair has also formed a small ascending channel shown in green. It is also between the bigger red channel and slightly above the key support at 1.2732, the highest point on November 29th.
Therefore, the pair will likely remain in this range on Monday since US markets will be closed. It will then have a bearish breakout to the psychological point at 1.2700 in the next few days.
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