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Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.2625.
- Add a stop-loss at 1.2800.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.2760 and a take-profit at 1.2850.
- Add a stop-loss at 1.2685.
The GBP/USD pair was flat as investors waited for the important consumer inflation data from the United States. The pair was trading at 1.2720 while the US dollar index (DXY) remained in at $102.10.
Inflation jitters are rising
The GBP/USD pair has barely moved this week as traders waited for July’s consumer inflation data. These numbers comes at a time when the market is sending mixed signals about prices.
On Wednesday, data showed that China’s consumer price index moved into deflation as it dropped by 0.3%. This is an important figure since China is the biggest exporter in the world.
At the same time, energy prices have continued rising. Brent and crude oil prices rose to $87.50 and $84.31, respectively. European natural gas prices rose by more than 40% on Wednesday as concerns about Australian imports rose.
Analysts expect the data to show that inflation remained stubbornly high in July. Precisely, expectations are that the headline CPI rose from 3.0% in June to 3.3% in July while core inflation dropped to 4.8% to 4.7%. In this case, the CPI index is expected to rise from $305.11 to $305.81.
A stronger-than-expected inflation number will likely push the GBP/USD pair downwards since it will raise the stakes for the Federal Reserve to hike interest rates in the next meeting in September.
These numbers will come a few days after the US published the latest US non-farm payrolls (NFP) data. The numbers showed that the labor market is still tight, with the unemployment rate falling to 3.50%.
GBP/USD technical analysis
The GBP/USD has gone nowhere this week as investors waited for the upcoming US consumer inflation numbers. On the four-hour chart, the pair has formed a symmetrical triangle, which is nearing its confluence level. The pair has moved slightly below the 25-period and 50-period exponential moving averages (EMA).
The GBP to USD exchange rate has moved below the important resistance level at 1.2843, the highest level in June. The pair will likely have a bearish breakout on Thursday ahead or after the US inflation numbers. Such a drop will see it drop to the next support level at 1.2625, the lowest point on Friday.
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