Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.1400.
- Add a stop-loss at 1.1615.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.1570 and a take-profit at 1.1650.
- Add a stop-loss at 1.1450.
The GBP/USD price erased gains made earlier this week after the strong US inflation and UK jobs data. Focus now shifts to the upcoming US producer price index (PPI) and UK inflation numbers. It dropped to a low of 1.1500, which was the lowest level since September 9.
UK and US inflation data ahead
The GBP/USD pair retreated after the latest UK jobs data. The numbers showed that the country’s labor market is still strong as the unemployment rate dropped to 3.6%. Wages continued rising as the market tightened. Without bonuses, wages jumped from 4.7% to 5.2% in July. Bonuses included, wages rose by 5.5%.
The pair then dropped sharply after the US published the latest inflation data. The data revealed that the country’s inflation rose by 8.3% year-on-year, which was higher than the median estimate of 8.1%. It rose by 0.1% from the previous month.
The core consumer price index rose by 0.6% from July and 6.3% from the same period in 2021. This increase was mostly because of the soaring shelter, food, and medical care prices. As such, while gasoline price has eased slightly, consumers are still suffering from the soaring prices.
Therefore, the view in the financial market is that the Fed will deliver another 0.75% rate hike when it meets next week. It will then pivot to a smaller 0.50% in the final meetings of the year. The US will publish the latest US producer inflation data later today.
The other key catalyst for the GBP/USD pair will be the latest UK inflation data. Analysts expect that UK inflation continued rising as gas prices remained elevated. The headline CPI is expected to come in at 12.3% while core CPI will rise to 6.3%.
GBP/USD forecast
The four-hour chart shows that the GBP/USD pair has been in a strong bearish trend in the past few weeks. It dropped below the standard pivot point at 1.1550. Also, the pair moved below the 25-day and 50-day moving averages and the vital support level at 1.1613. The MACD and the Relative Strength Index (RSI) are pointing downwards.
Therefore, the pair will likely continue falling as sellers target the next key support at 1.1400. The stop-loss for this trade will be at 1.1615.
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