Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.3100.
- Add a stop-loss at 1.2800.
- Timeline: 1-2 days.
Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.2800.
- Add a stop-loss at 1.3100.
The GBP/USD exchange rate continued its strong surge, reaching its highest level since November 8. It rose to a high of 1.2957, up by over 7% from the lowest level this year, making sterling one of the best-performing currencies.
The GBP/USD pair jumped as traders watched the ongoing trade tensions between the US and Canada. Donald Trump announced that the US would impose a 50% tariff on imported steel and aluminum from the country. He also warned that he would add substantial tariffs on vehicles imported from Canada, a move that would shutter the industry.
The pair rose after Howard Lutnick, the Commerce Secretary warned that he would negotiate with Ontario. Ontario, a top Canadian state, then said that it would delay its electricity price increases.
Still, even the remaining tariffs imposed by the US and Canadian government risk doing substantial damage to the two sides because of the volume of trade in the two sides.
The next important catalyst for the GBP/USD pair will be the upcoming US inflation data. Economists expect the data to show that US inflation softened slightly in February, with the headline CPI falling to 2.9% and the core figure falling to 3.2%.
These numbers will likely not have a major impact on the US dollar because analysts anticipate inflation will continue rising later this year. Inflation will surge as companies add prices of goods brought to the US because of the ongoing tariff wars.
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GBP/USD technical analysis
The GBP/USD pair has been in a strong uptrend in the past few months. It has jumped from the year-to-date low of 1.2100 in January to a high of 1.2955, its highest swing in months.
The 50-day and 25-day moving averages have made a bullish crossover, a highly bullish sign. It has also jumped above the 61.8% Fibonacci Retracement level and the Ichimoku cloud indicator.
Oscillators like the Relative Strength Index (RSI) and the MACD indicators have continued rising. The Average Directional Index (ADX) has risen to 25, a sign that the bullish momentum is gaining steam.
Therefore, the GBP/USD pair will likely keep rising as bulls target the next key resistance level at 1.3100. A move below the support at 1.2800 will invalidate the bullish view, and point to more decline to the next key support at 1.2500.
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