Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.4000.
- Add a stop-loss at 1.2900.
- Timeline: 1-2 days.
Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.2900.
- Add a stop-loss at 1.400.
The GBP/USD exchange rate continued its strong bullish momentum, reaching the psychological point at 1.3000 for the first time since November last year. It has been in a strong upward trend after bottoming at 1.2100 earlier this year.
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BoE and Federal Reserve decision
The GBP/USD pair has been in a strong bullish trend in the past few months as the US dollar index (DXY) crashed to $103.37, its lowest level since October.
The pair continued its strong uptrend as the risk-on sentiment prevailed in the market. US stocks rose for the second consecutive day, while the VIX index dropped by 6% to $20.4.
The GBP/USD exchange rate will be in focus this week as the Federal Reserve and Bank of England (BoE) deliver their second interest rate decisions of the year.
Economists expect the Fed will leave interest rates at 4.5%. In previous statements, Jerome Powell, the bank’s governor, has insisted that he will not be in a hurry to slash interest rates until inflation slowed.
Last week's data showed that the US consumer price index dropped slightly in February. The headline CPI dropped to 2.8%, while the core CPI moved to 3.1%. While this decline was good, it did not include the impact of Donald Trump’s tariffs.
The US published soft retail sales data on Monday. Retail sales rose by 0.2% in February, missing the analysts' estimate of 0.4%, while core sales fell rose by just 0.3%. These numbers raised the odds that the Fed will have a dovish tilt when it meets on Wednesday.
The GBP/USD pair will react to the upcoming BoE decision. While the UK economy is slowing, the BoE will likely leave rates unchanged in this meeting because of its worries about inflation.
GBP/USD technical analysis
The GBP/USD pair has been in a strong uptrend after bottoming in February. On the daily chart, the pair has moved above the 61.8% Fibonacci Retracement point at 1.2925.
The pair has moved above the 50 and 200-day weighted moving averages and the Ichimoku cloud indicator. The Relative Strength Index (RSI) and the Awesome Oscillator have all pointed upwards.
Therefore, the pair will likely continue rising as bulls target the next psychological point at 1.4000. A drop below the 50% retracement level at 1.2765 will invalidate the bullish outlook.
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