GBP/USD Forex Signal: Bearish Flag Signals Possible Pullback

Crispus Nyaga

There is a likelihood that the pair will retreat in the near term.

Bearish View

  • Set a sell-stop at 1.3450 and a take-profit at 1.3350 (last week’s low).

  • Add a stop-loss at 1.3550.

  • Timeline: 1-2 days.

Bullish View

  • Set a buy-stop at 1.3490 and a take-profit at 1.3550.

  • Add a stop-loss at 1.3400.

The GBP/USD pair tilted upwards on Wednesday and early Thursday as the market reflected on the overall strong economic data from the UK and the US. The pair rose to 1.3478, which was slightly above last week’s low of 1.3350.

Strong US and UK Data

The British pound rose slightly against the US dollar after the strong inflation data from the UK. The currency’s uptrend against other currencies was more pronounced. For example, it rose to a 21-month high against the euro and to a two-weeek high against the Swiss franc.

The performance happened after the UK published a streak of strong economic data. For example, on Tuesday, the Office of National Statistics (ONS) published strong employment numbers.

The data revealed that the country’s unemployment rate dropped to 4.4% in September. The number of people filing jobless claims has also dropped.

On Wednesday, data by the statistics agency also showed that the country’s inflation was rising. The headline consumer price index (CPI) rose from 3.1% in September to 4.2% in October. In the same period, core inflation rose to 3.4%, which was the highest level in more than a decade. The producer price index (PPI) and retail price index also soared.

Therefore, analysts expect that the Bank of England (BOE) will embrace a more hawkish tone in the coming months. This is because the economy is in a path to recovery. In its November meeting, the Bank of England surprised the market by sounding relatively dovish. It left interest rates and quantitative easing unchanged. Focus now shifts to Friday when the UK will publish the latest retail sales numbers.

The GBP/USD pair’s gains were relatively small because of the strength of the American economy. The country published strong retail sales, building permits, and housing starts this week.

GBP/USD Forecast

The GBP/USD rose after the strong UK inflation numbers. On the four-hour chart, the pair has moved slightly above the standard pivot point and the 25-period moving average. Notably, the pair has also formed a bearish flag pattern that is shown in pink. In analysis, a bearish flag is usually a sign of a bearish sign.

Therefore, there is a likelihood that the pair will retreat in the near term. This view will be confirmed if the pair moves below the lower side of the bearish flag pattern. It it happens, the next key reference point will be at last week’s low of 1.3350.

GBP/USD

Crispus Nyaga
Crispus Nyaga is a financial analyst, coach, and trader with more than 8 years in the industry. He has worked for leading companies like ATFX, easyMarkets, and OctaFx. Further, he has published widely in platforms like SeekingAlpha, Investing Cube, Capital.com, and Invezz. In his free time, he likes watching golf and spending time with his wife and child.

Did you like what you read? Let us know what you think!

exclamation mark

Please make sure your comments are appropriate and that they do not promote services or products, political parties, campaign material or ballot propositions. Comments that contain abusive, vulgar, offensive, threatening or harassing language, or personal attacks of any kind will be deleted. Comments including inappropriate will also be removed.

0 User comments

exclamation mark

Please make sure your comments are appropriate and that they do not promote services or products, political parties, campaign material or ballot propositions. Comments that contain abusive, vulgar, offensive, threatening or harassing language, or personal attacks of any kind will be deleted. Comments including inappropriate will also be removed.

Read more
Add new comment
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.