Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.2830.
- Add a stop-loss at 1.2770.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.2785 and a take-profit at 1.2700.
- Add a stop-loss at 1.2835.
The GBP/USD pair continued recovering after the UK published mixed economic numbers. It jumped to a high of 1.2800, which was 45 basis points above its lowest level this month. The focus shifts to the upcoming US retail sales numbers.
US retail sales data ahead
The GBP/USD pair continued to rebound after the latest UK GDP numbers showed that the economy returned to growth in January.
According to the Office of National Statistics (ONS), the economy expanded by 0.2% in January after contracting by 0.1% in December. It remained about 0.2% below where it was in the same month in 2023.
Additional numbers revealed that the country’s construction output expanded by 1.1% in January, higher than the expected 0.0%. This increase led to a year-on-year increase of 0.7%.
The manufacturing and industrial production rose by 2.0% and 0.5%, respectively. Also, the country’s trade deficit rose by £14.5 billion during the month.
These numbers mean that the country’s economy is doing better than expected. As a result, the view is that the Bank of England (BoE) will maintain rates at 5.0% for longer since inflation is still stubbornly high. Most analysts expect that the bank will start cutting rates in August.
The next important economic data will be the upcoming US retail sales numbers. Economists polled by Reuters expect the data to show that the country’s sales rose by 0.8% after falling by 0.8% in the previous month.
The numbers are also expected to reveal that core retail sales rose by 0.5% after retreating by 0.6% in the previous month. These numbers will come after another report revealed that inflation remained at an elevated level in March. The US will also publish the latest producer price index (PPI) report on Thursday.
GBP/USD technical analysis
The GBP/USD pair retreated to a low of 1.2746 on Monday as traders reflected on last Friday’s non-farm payrolls (NFP) data. It then formed a hammer pattern on the four-hour chart and started to bounce back.
The pair has crossed the crucial resistance level at 1.2774, the highest swing on January 24th and February 2nd. It has also risen above the 50-period moving average and is approaching the key resistance level at 1.2828 (December 28th high).
The pair has also soared above the Ichimoku cloud indicator. Therefore, the pair will likely continue rising as buyers target the next target at 1.2830. The stop-loss of this trade is at 1.2775.
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