Bearish View
- Set a sell-stop at 1.4085 and a take-profit at 1.4000.
- Add a stop-loss at 1.4150.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 1.4150 and a take-profit at 1.4250.
- Add a stop-loss at 1.4100.
The GBP/USD pair retreated during the American session as traders waited for the US inflation and UK industrial and manufacturing output data. The pair fell to 1.4110, which was the lowest level since last Friday.
US Inflation Data
The biggest mover for the GBP/USD and other majors will be the US inflation data that will come out later today. Economists polled by Bloomberg expect the data to show that the headline CPI rose from 4.2% to 4.7% while core CPI rose from 2.3% to 3.2%. Core CPI excludes the volatile food and energy prices.
The inflation numbers are important because they will set the tone for the Federal Reserve. If the numbers are significantly below the estimates, they will give the Fed more room to continue with its pandemic response. On the other hand, if the numbers beat estimates, it will mean that the Fed will be under pressure to act faster than expected. Furthermore, recent data showed that the American unemployment fell to a post-pandemic low of 5.8%.
The GBP/USD will also react to the upcoming US initial jobless claims numbers. The data are expected to show that the number of Americans filing for new jobless claims declined from 385,000 to 370,000. This will be another post-pandemic low and a sign that the labor market is tightening. This is after recent data showed that the number of open vacancies rose to the highest level in recent years.
Meanwhile, the GBP/USD will react to the latest UK manufacturing and industrial production data that will come out on Friday. The data are expected to show that the manufacturing production fell from 2.1% in March to 1.5% in June. Similarly, industrial production is expected to fall from 2.1% to 1.5%.
GBP/USD Technical Analysis
The four-hour chart shows that the GBP/USD pair has been in a tight range in the past few weeks. The pair is trading at 1.4115, which is significantly below this week’s high of 1.4200. It is also slightly above the important support at 1.4095 and slightly below the 25-day moving average.
Also, the volume has been in a downward trend. Therefore, at this stage, the outlook for the pair is neutral, with a bearish bias since the pair seems to have formed a head and shoulders pattern. A bullish view will be confirmed when the price falls below the support at 1.4085.
