GBP/USD Forex Signal: Path of Least Resistance is Higher

Crispus Nyaga

The pair will likely keep rising as bulls target the key resistance at 1.3700.

Bullish View

  • Buy the GBP/USD pair and add a take-profit at 1.3700.

  • Add a stop-loss at 1.3500.

  • Timeline: 1-2 days.

Bearish View

  • Add a sell-stop at 1.3560 and a take-profit at 1.3500.

  • Add a stop-loss at 1.3650.

The GBP/USD pair jumped to the highest level since November after the mixed jobs numbers from the United States. It is trading at 1.3590, which is about 3.30% above its lowest level in December last year.

Fed and BOE Convergence

The GBP/USD pair rose as investors reacted to the mixed US jobs numbers. Data by the American government revealed that the economy added about 199k jobs in December. This was significantly lower than the median estimate of about 420k jobs. Also, the figure was substantially lower than the estimate of 800k jobs by ADP.

While the headline figure was weak, economists saw some strong signs that the labor market was indeed doing well. For example, the unemployment rate declined to 3.9% in December. This was the lowest level since the pandemic started. If the trend continues, it means that the rate will move to its pre-pandemic level in the fourth quarter of this year.

Another positive thing in the report was that wages are also rising. Overall wages jumped to 0.6% in December, leading to an annualized increase of 4.7%. Therefore, with inflation being at record highs, the wage number was the most closely watched.

Meanwhile, the UK economy is doing well even as the Omicron spreads. On Friday, data by Halifax showed that home prices rose by 9.8% in 2021. This was the best annual increase since 2007. It meant that an average home price rose to a record high of 276,090 pounds in December. That was about 24,000 pounds over a year.

Therefore, analysts see a convergence between the Federal Reserve and the Bank of England (BOE). In December, the BOE became one of the first banks to hike rates. Now, analysts expect that it will implement a few hikes this year. The Fed will also hike about 3 times starting from March.

GBP/USD Forecast

The four-hour chart shows that the GBP/USD pair has been in a strong bullish trend in the past few weeks. The pair has managed to move slightly above the 61.8% Fibonacci retracement levels. It has also risen above the 25-day and 50-day moving averages.

Also, it has moved above the ascending trend line that is shown in yellow. The Stochastic Oscillator has moved close to the overbought level. Therefore, the pair will likely keep rising as bulls target the key resistance at 1.3700.

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.

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