Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.2525.
- Add a stop-loss at 1.2385.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.2450 and a take-profit at 1.2400.
- Add a stop-loss at 1.2525.
The GBP/USD pair has staged a strong comeback from its lowest point this week to a high of 1.2465, its highest swing since Thursday last week. It rallied as the US dollar, crude oil, and precious metals retreated.
US economic data ahead
The GBP/USD pair has bounced back in the past few days amid a risk-on sentiment among traders. This sentiment spread after Israel delivered a muted retaliatory attack against Iran last week.
The market believes that the crisis will not escalate anymore, which explains why the price of crude oil has pulled back sharply in the past few days. Brent has dropped to $88 while the West Texas Intermediate (WTI) moved to $82.5.
The pair also rebounded after the Bank of England’s chief economist warned that the market was getting highly optimistic about interest rate cuts. He believes that the country’s inflation will continue falling but that reflation is still a risk.
Before his statement, economists were expecting that the bank will start cutting rates as soon as in its upcoming meeting in May.
There will be no economic report from the UK on Thursda. Therefore, the key driver for the GBP/USD pair will be the upcoming US GDP and PCE data. These are important numbers that will help the Fed when making its interest rate decision on Wednesday.
Economists polled by Reuters expect the report to show that the British economy expanded by 2.5% in Q1 as the impact of Biden’s spending packages continued. The economy is also being boosted by the robust consumer spending.
The next report will come out on Friday when the US will publish the latest PCE report. This is an important figure since it is the Fed’s favorite inflation gauge. Analysts expect the report to show that the headline and core PCE figures rose to 2.6% in March.
GBP/USD technical analysis
The GBP/USD pair has bounced back in the past few days. On the 4H chart, it has rebounded above the 23.6% Fibonacci Retracement point. The pair has moved slightly above the 50-period Exponential Moving Average (EMA).
Meanwhile, the Relative Strength Index (RSI) has moved above the neutral point at 50. The Bull Bear Power indicator has moved above the neutral level and turned green. It has also formed an inverse head and shoulders pattern.
Therefore, the outlook for the GBP/USD pair is bullish, with the next point to watch being the 38.2% retracement at 1.2525.
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