Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.2600.
- Add a stop-loss at 1.2750.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.2700 and a take-profit at 1.2765.
- Add a stop-loss at 1.2600.
The GBP/USD exchange rate was flat on Wednesday morning as traders waited for the March inflation report. The pair was trading at 1.2680, a few points above this month’s low of 1.2545.
US inflation data ahead
The GBP/USD pair reacted mildly to the statement by Raphael Bostic, the head of the Atlanta Fed. He said that the bank will likely cut rates one time this year because of the strength of the economy and high inflation. He also insisted that he would be open to changing his mind if inflation retreat.
Federal Reserve officials have been divided on when the rate cuts will start. The recent dot plot showed that ten officials expect three or more rate cuts this year. Nine members anticipate two or fewer cuts.
Signs that the Fed will not deliver more cuts continued on Friday when the US published strong jobs numbers. The unemployment rate dropped to 3.8% in March as the economy added over 300k jobs.
Looking ahead, the US will deliver the latest consumer inflation numbers. These are notable figures since they form an important part of the bank’s dual mandate. Economists expect the data to show that the headline inflation rose to 3.4% in March while core CPI moved to 3.7%. These numbers will be higher than the Fed’s target of 2.0%.
The GBP/USD pair will also react to a statement by Austan Goolsbee, the head of Chicago Fed. In a recent statement, he hinted that he was in support of three rate cuts.
The other news will be the minutes of the last Fed meeting. These minutes will provide more information about what the Fed officials said in the second meeting of the year. In that meeting, the members left interest rates unchanged between 5.25% and 5.50%.
GBP/USD technical analysis
The GBP/USD exchange rate has been in a strong uptrend in the past few days. This rebound started after the pair dropped to a low of 1.2535 on Monday last week. It has moved above the crucial resistance point at 1.2667, its highest swing on March 26th.
The pair has jumped above the 50-period Weighted Moving Average and the Ichimoku cloud. Also, the Percentage Price Oscillator (PPO) and the Relative Strength Index (RSI) have all pointed upwards.
The pair’s price action will be influenced by the US inflation data. A strong report will lead to a reversal, which will see it drop to a low of 1.2600. On the other hand, weak inflation figures will lead to more upside.
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