GBP/USD Forex Signal: Rally Eases But Bullish Trend Still Intact

The GBP/USD price retreated slightly as the bullish momentum continued. On the 4H chart, the pair dropped to the standard pivot . It moved slightly above the ascending yellow trendline. 

Bullish view

  • Buy the GBP/USD pair and set a take-profit at 1.2440.
  • Add a stop-loss at 1.2000.
  • Timeline: 1-2 days.

Bearish view

  • Set a sell-stop at 1.2110 and a take-profit at 1.2225.
  • Add a stop-loss at 1.2050.

The GBP/USD price pulled back as the recent rally started easing. It retreated to a low of 1.2200, which was lower than last week’s high of 1.2338. The decline happened as the market focused on the upcoming interest rate decisions by the Federal Reserve and Bank of England (BoE).

US and UK divergence

The US and UK are showing signs of economic divergence. In the US, recent data showed that the economy was doing relatively well. In November, data showed that the economy expanded by 2.3% in the third quarter as consumers remained resilient.

Last Friday, additional data showed that the labor market was relatively strong in November. According to the Labor Department, the economy expanded by over 280k jobs while the unemployment rate remained at 3.7%. Wages jumped by 5.2%.

On the other hand, data from the UK showed that the economy is struggling and in a recession already. House prices have been in a deep dive amid high mortgage rates. At the same time, data published on Monday showed that the services and composite PMIs declined to 48.8 and 48.5, respectively. A PMI figure of less than 50 is usually a bearish sign.

Therefore, analysts believe that the Federal Reserve will likely continue hiking interest rates for longer. They expect that the bank will hike rates by 0.50% in December, bringing the year-to-date increase to 450 basis points. If this happens, the Fed will likely push rates above the psychological level of 5%.

There will be no major economic data from the US and the UK on Monday. The only data from the UK will be the construction PMI, which has no major impact on the GBP/USD pair. Therefore, traders will likely continue focusing on next week’s American inflation data and interest rate decisions by the BoE and Fed.

GBP/USD forecast

The GBP/USD price retreated slightly as the bullish momentum continued. On the 4H chart, the pair dropped to the standard pivot . It moved slightly above the ascending yellow trendline. The pair’s Relative Strength Index (RSI) and the Commodity Channel Index (CCI) continued falling, with the RSI moving to the neutral point.

Therefore, the pair will continue falling slightly on Tuesday and then resume the bullish trend. If this happens, it will likely retest the first resistance level at 1.2440.

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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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