Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.2535.
- Add a stop-loss at 1.2665.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.2615 and a take-profit at 1.2725.
- Add a stop-loss at 1.2550.
The GBP/USD exchange rate moved sideways last week as the UK published mixed economic numbers. It was trading at the important point at 1.2600 on Monday ahead of a relatively calm week in the market since there will be no major economic releases.
Mixed UK economic numbers
The UK published a trove of mixed economic numbers. Data by the Office of National Statistics (ONS) revealed that inflation remained significantly higher than expected in January. The headline inflation held steady at 4%, double than the Bank of England’s 2.0%.
The other important report came out on Thursday when data revealed that the country sunk into a recession in the fourth quarter. This contraction happened as many people and businesses slashed their spending because of high-interest rates.
On the positive side, there are signs that the UK will emerge from the recession soon. On Friday, a report revealed that retail sales rebounded in January. Sales volume rose by 3.4% in January after falling by 3.3% in the previous month. This increase was the biggest one since 2021.
These numbers caused many analysts to reassess their view on the next actions by the Bank of England (BoE). The expectation is that the bank will hold rates steady in the next few meetings and then deliver three to four cuts in the second half of the year.
Meanwhile, data from the US revealed that inflation also remained at an elevated level in January. The headline CPI rose by 3.1% in January while core inflation fell slightly to 3.8%. These numbers mean that the Fed will not be in a hurry to cut rates in this first half of the year.
There will be no major economic numbers this week. The only important events will be the release of the Fed’s minutes on Wednesday and several statements by Fed officials.
GBP/USD technical analysis
The GBP/USD pair continued moving sideways on Monday morning. On the 4H chart, the pair has retested the important resistance point at 1.2613, the lowest swings in December and January. It also remains below last week’s high of 1.2692 and is oscillating at the 50-period and 25-period moving averages.
The pair has moved slightly below the 23.6% Fibonacci Retracement level. Therefore, the outlook for the pair is neutral with a bearish bias. It will likely remain in this range and then pull back later this week. This means that it could retest the important support at 1.2517, the lowest swing this year.
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