Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.2300.
- Add a stop-loss at 1.2100.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.2145 and a take-profit at 1.2050.
- Add a stop-loss at 1.2250.
The GBP/USD price moved sideways during the American and Asian sessions after the latest American consumer price index (CPI) data. The focus now shifts to the upcoming UK budget, which will come out on Wednesday. It was trading at 1.2150, which was a few points below this week’s high of 1.2200.
UK budget ahead
The Bureau of Labor Statistics (BLS) showed that inflation decelerated again in February. The headline consumer price index (CPI) dropped from 0.5% in January to 0.4% in February. On a year-on-year basis, inflation moved from 6.4% to 6.0% on a YoY basis. Core inflation also dropped slightly from 5.6% to 5.5%.
However, the closely watched core CPI accelerated to 0.5%. This means that the Federal Reserve will be under intense pressure when it completes its meeting next week. As such, analysts believe that the Fed will likely hike interest rates by about 0.25% in the meeting. Before the data, expectations were that the Fed would pause its rate hikes.
This explains why US bond yields rebounded on Tuesday. The yield on the 10-year Treasury bonds rose to 3.64% while the 5-year and 30-year jumped to 3.7% and 3.8%, respectively. The US will publish the latest producer price index (PPI) later on Wedneday. Economists expect that the headline PPI dropped to 5.4% while core PPI fell to 5.2%. The US will also publish the latest retail sales numbers.
The next key catalyst for the GBP/USD pair will be the upcoming UK budget by Jeremy Hunt. In it, media reports believe that he will set his priorities for the next year. He is expected to hike corporate taxes to 25% and leave the energy price guarantee at 2,500 pounds.
GBP/USD forecast
The GBP/USD price has been in a bullish trend in the past few days. It has moved from last week’s low of 1.1800 to a high of 1.2200. The pair has moved to the 61.8% Fibonacci Retracement level. It has also formed a bullish flag pattern and jumped above the 25-period and 50-period exponential moving averages (EMA). The pair has also moved slightly above the important support at 1.2142, the highest point on February 28 and 21.
Therefore, the GBP/USD pair will likely continue rising as buyers target the next key resistance level at 1.2300. The stop-loss of this trade will be at 1.2130.
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