Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.2700..
- Add a stop-loss at 1.3000.
- Timeline: 1-2 days.
Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.3000.
- Add a stop-loss at 1.2695.
The GBP/USD exchange rate rose to a multi-month high of 1.2925 as the US dollar index (DXY) dropped. It has jumped by over 6.15% from its lowest level this year as focus shifts to the upcoming inflation data.
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US inflation data ahead
The GBP/USD exchange rate continued rising as the dollar index dropped to $106.3, its lowest level since November 6. It has crashed by over 5.5% from its highest level this year.
American equities have also plunged, with the top indices like the Nasdaq 100 and S&P 500 falling by over 2% on Monday. The Nasdaq 100 index shed over $1 trillion in value as many blue-chip stocks plunged.
The pair has jumped as concerns about the American economy continued following Donald Trump’s tariffs. Economists expect that the US economy could slowdown significantly if these tariffs remain.
The economy will slow as consumer and business confidence eased. Data released by Conference Board two weeks ago showed that consumer confidence dropped to the lowest level in months.
American bond yields have continued falling this month as hopes that the Federal Reserve will deliver more rate cuts later this year.
The next key catalyst for the GBP/USD exchange rate will be the upcoming US inflation data scheduled on Wednesday. These numbers will provide more information about the US economy and what to expect going ahead.
Economists expect the data to show that the headline Consumer Price Index (CPI) dropped to 2.9% in February, while the core CPI, which excludes the volatile food and energy prices fell to 3.2%.
Historically, these inflation numbers lead to more volatility in the US dollar. This week’s data will likely have no major impact on the currency because they won’t include the impact of the recent tariffs.
GBP/USD technical analysis
The daily chart shows that the GBP/USD exchange rate has been in a strong uptrend in the past few months. It has soared from a low of 1.2090 in January to a high of 1.2925, its highest level since November 8.
The pair has moved to the 61.8% Fibonacci Retracement level. It has also jumped above the 50-day moving average and the Ichimoku cloud. Also, it is between the strong pivot reverse and the top of trading range of the Murrey Math Lines tool.
Therefore, the pair will likely retreat and retest the major S&R pivot point at 1.2695 and then resume the uptrend.
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