Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.2665.
- Add a stop-loss at 1.2500.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.2550 and a take-profit at 1.2500.
- Add a stop-loss at 1.2650.
The GBP/USD exchange rate moved sideways on a quiet day on Monday since the UK’s market was closed for a bank holiday. The pair was stuck at 1.2565 on Tuesday, where it has been hovering in the past few days. This price is at its highest point since April 10th.
Bank of England's decision
The GBP/USD pair moved sideways as the US dollar index stalled. The index, which measures the performance of the greenback against a basket of currencies, was trading at $104.95, down from last week’s high of $106.3.
Similarly, the bond market also continued wavering. The 10-year government bond yield was trading at 4.50% while the 30-year moved to 4.66%. This performance happened a few days after the US published weak job numbers.
The numbers revealed that the economy created 175k jobs in April, missing analysts' estimates. Other numbers showed that the country’s consumer confidence, manufacturing, and services PMIs dropped below 50.
These numbers came in the same week that the Federal Reserve delivered its interest rates decision. The bank left rates unchanged between 5.25% and 5.50% for the sixth straight meeting.
On Monday, Fed’s Thom Barkin noted that he expected that interest rates would remain higher for longer. New York Fed’s John Williams noted that the bank would likely start cutting rates later this year.
There will be no economic numbers from the US and the UK on Tuesday. The only important event will be a statement by Neel Kashkari, the head of the Minneapolis Federal Reserve.
The biggest driver for the GBP/USD pair will be the upcoming Bank of England decision. In it, analysts expect the bank will leave interest rates unchanged and then hint at a rate cut in its June meeting.
GBP/USD technical analysis
The GBP/USD pair has been in a slow bullish trend in the past few days. It has risen from last month’s low of 1.2300 to a high of 1.2631, the first resistance of the Woodie pivot point. The pair has rebounded above the 25-period and 50-period moving averages.
The MACD indicator and the Relative Strength Index have continued rising, pointing to more bullish momentum. It has also formed an inverse head and shoulders pattern.
Therefore, the pair will likely continue rising as buyers target the 61.8% Fibonacci Retracement point at 1.2665.
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