Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.2775.
- Add a stop-loss at 1.2650.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.2725 and a take-profit at 1.2650.
- Add a stop-loss at 1.2825.
The GBP/USD exchange rate continued rising this week after Jeremy Hunt delivered a series of tax cuts in the UK. It also rose after a statement by Jerome Powell, the head of the Federal Reserve. It jumped to a multi-week high of 1.2761, much higher than the YTD low of 1.2518.
UK budget news
The GBP/USD pair continued its bullish momentum after Jeremy Hunt made a series of tax cuts with hopes of stimulating the economy. He slashed personal taxes for the second time in four months. He hopes that these cuts will benefit over 27 million people.
The tax cuts are also expected to help stimulate an economy that is facing major headwinds as the number of bankruptcies rise. Recent data showed that the country’s manufacturing PMI numbers remained deeply in the red. The country also moved into a recession last month.
Still, it is unclear whether these cuts will go further enough to boost the country’s economy. A recent report by the IMF estimated that the economy will have the second-slowest growth rate among the G7 member states.
The GBP/USD pair rose after the US published mixed jobs numbers. In a report, the ADP noted that the private sector added 140k jobs in February, lower than the expected 149k. A separate report showed that the number of job openings dropped to 8.63 million in January from the previous month’s 8.88 million.
These numbers came two days before the Bureau of Labor Statistics (BLS) will publish its February Non-Farm Payrolls (NFP) data. This is an important report because it forms part of the Federal Reserve’s dual mandate.
In a statement on Wednesday, Jerome Powell, the head of the Federal Reserve said that the bank was still observing trends in inflation. It wants to be sure that inflation is moving towards its 2% target before starting to cut interest rates.
GBP/USD technical analysis
The GBP/USD pair continued its uptrend on Thursday morning as it soared to its highest point since February 2nd. The pair has crossed the key resistance at 1.2735, its highest swing on Tuesday. It also remains above 1.2700, invalidating a double-top pattern that has been forming.
It is also a few points below the second resistance of the Woodie pivot point. It is much higher than the 50-period moving average. Therefore, the pair will likely continue rising as bulls target the key resistance level at 1.2774, its highest swing on January 24th.
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