The pair will likely continue rising as buyers target the second resistance level at 1.2415.
- Buy the GBP/USD pair and set a take-profit at 1.2420.
- Add a stop-loss at 1.2200.
- Timeline: 1-2 days.
- Set a sell-stop at 1.2225 and a take-price at 1.2150.
- Add a stop-loss at 1.2320.
The GBP/USD price continued its bullish trend as investors refocused on the upcoming interest rate decision by the Bank of England (BoE). It also rallied as the US dollar and bond yields continued falling. The pair rose to a high of 1.2295, which was the highest level since June 28th of this year. It has risen by more than 4.22% from the lowest point this year.
US Dollar Sell-Off
The GBP/USD pair continued its bullish trend as the US dollar continued falling. The dollar index has droopped from last week’s high of $109.30 to the current $105.7. This decline is mostly because of the ongoing feeling that the Federal Reserve will not be as hawkish as expected.
Last week, the Fed decided to hike interest rates by 0.75%, bringing the year-to-date increase to 225 basis points. The bank will also continue reducing its balance sheet. At the same time, the committee warned that it will continue hiking interest rates in a bid to fight the soaring inflation.
However, analysts now believe that the Fed will not be as hawkish as expected because of the performance of the economy. Data published last week revealed that new and existing home sales declined sharply in June.
Worse, additional data showed that the country sank to a recession in the second quarter as it contracted by 0.9%. As a result, the yield of the 10-year bond year government bonds dropped to 2.66% while the 30-year fell to 2.90%.
The next key catalyst for the GBP/USD pair will be the upcoming American JOLTs data. Economists expect the data to show that the number of vacancies dropped from 11.25 million in June to 11 million in July.
On the bigger picture, the next key catalyst to watch will be the upcoming Bank of England interest rate decision and the US jobs data.
The four-hour chart shows that the GBP/USD pair formed an inverted head and shoulders pattern in July. In price action analysis, this pattern is usually a bullish sign. The pair has managed to move above the 25-day and 50-day moving averages. As the pair rose, it moved to the first resistance of the standard pivot point.
Therefore, the pair will likely continue rising as buyers target the second resistance level at 1.2415. A drop below the support level at 1.2200 will invalidate the bullish view.