Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.2650.
- Add a stop-loss at 1.2775.
- Timeline: 1-2 days
Bullish view
- Set a buy-stop at 1.2730 and a take-profit at 1.2785.
- Add a stop-loss at 1.2650.
The GBP/USD price pulled back slightly after the flash UK and US manufacturing and services PMI numbers. The pair retreated to a low of 1.2720, a few points below Wednesday's high of 1.2775.
US GDP data ahead
S&P Global published strong economic numbers from the United States and the UK, signaling that the two countries started the year well.
In the UK, the manufacturing PMI rose from 46.2 in December to 47.3 in January, higher than the median estimate of 46.7. Similarly, the services PMI jumped from 53.4 to 53.8 in January while the composite PMI rose to 52.5. These numbers came a few days after the Office of National Statistics released higher inflation but weak retail sales data.
Elsewhere, in the UK, the manufacturing PMI rose to 50.3 while the services and composite PMIs soared to 52.9 and 52.3, respectively. This is a sign that manufacturers and service providers are doing modestly well as demand remains stable.
The next important numbers to watch will be from the United States, which will publish the first estimate of Q4 GDP report. Economists expect the report to reveal that the economy continued to grow in Q4, helped by the strong consumer. Precisely, they believe that the economy expanded by 2.0% in Q4 after growing by 5.2% in Q3.
The other crucial numbers that will come out on Thursday are building permits and durable good data, which will provide more color about the state of the economy.
Finally, the US will release the December PCE data on Friday. This is an important report because it is the Federal Reserve's favorite inflation gauge. Together with the most recent data, it will help the Fed when it meets next week to make its first decision of the year. Expectations are that the Fed will leave rates unchanged in this meeting.
GBP/USD technical analysis
The 4H chart shows that the GBP/USD pair's attempt to recover found a strong resistance at 1.2772. This price was a few points below the crucial resistance point at 1.2785, its highest swings on December 14th and January 12th.
The pair has formed a rectangle pattern and is now close to its middle point. It also remains slightly above the 25-day and 50-day moving average while the Awesome Oscillator is above the neutral point. Therefore, the pair will likely continue falling on Thursday, with the next target being at 1.2650, its lowest swing this week.
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