Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.2825.
- Add a stop-loss at 1.2745.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.2775 and a take-profit at 1.2700.
- Add a stop-loss at 1.2825.
The GBP/USD retreated sharply and then bounced back after the important UK and US economic numbers. It dropped from last week’s high of 1.2893 to a low of 1.2745. It then rebounded to a high of 1.2785 ahead of key UK GDP numbers.
UK GDP data ahead
The GBP/USD pair reacted to the mixed economic numbers from the UK. In a report, the Office of National Statistics (ONS) revealed that the country’s unemployment rate rose from 6.8% in December to 3.9% in January.
The country’s average earnings, excluding bonuses, rose by 6.1%, missing the analyst's estimates of 6.2%. With bonuses included, the country’s earnings rose by 5.6%, also lower than the median estimate of 5.7%.
The British economy also lost 21k jobs in the three months to January. The next important data to watch will come out on Wednesday when the ONS will release the latest GDP report. Economists expect the data to show that the economy expanded by 0.2% MoM in January after contracting by 0.1% in December.
They also expect the report to reveal that the economy contracted by 0.3% on a YoY basis. The ONS will also release the latest manufacturing and industrial production data. It will also publish January’s construction output and trade numbers.
The GBP/USD pair also retreated after the strong US inflation report. According to the BLS, the headline Consumer Price Index (CPI) rose from 0.3% in January to 0.4% in February. This translated to a year-on-year increase of 3.2%.
The core CPI, which excludes the volatile food and energy products rose by 0.4% MoM and by 3.8% YoY. These numbers mean that the country’s inflation remained much higher than the Federal Reserve target of 2.0%.
GBP/USD technical analysis
The GBP/USD pair pulled back from last week’s high of 1.2893 to a low of 1.2745. It retreated below the important support level of 1.2785, its highest point in January. The pair has remained slightly above the 50-period moving average.
It has formed a hammer pattern, which is a bullish sign. Sterling also moved above the Ichimoku cloud indicator. The Percentage Price Oscillator (PPO) has pointed downwards. The outlook for the pair is bullish, with the next point to watch being at 1.2827, its highest swing in December.
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