Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.3500.
- Add a stop-loss at 1.3250.
- Timeline: 1-2 days.
Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.3250.
- Add a stop-loss at 1.3500.
The GBP/USD exchange rate was flat on Tuesday as the odds of convergence between the Federal Reserve and Bank of England (BoE) rose. It was trading at 1.3325, up from the November low of 1.3000.
BoE and Federal Reserve Convergence
The GBP/USD pair has risen in the past few days as investors focus on the final meetings by the Federal Reserve and Bank of England this year.
Economists expect the Fed to cut interest rates by 0.25% in this meeting to between 3.50% and 3.75%. Officials are concerned about the labor market and the fact that inflation has not jumped as initially expected.
ADP will publish its weekly report on the labor market later on Tuesday. The average estimate is that the private sector lost 13.5k workers last week. A previous report released last week showed that the economy lost over 36,000 jobs in November.
The other key report to watch later on Tuesday will be the JOLTs job openings and quits numbers. According to Trading Economics, the expectation is that the number of openings rose to 7.227 million in September from the previous 7.2 million.
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Meanwhile, Polymarket traders are convinced that the BoE will cut interest rates in its meeting on December 18. This cut will happen even as the most recent data showed that the headline consumer inflation remained at 3.6%. It has moved above the 2% target this year.
GBP/USD Technical Analysis
The daily chart shows that the GBP/USD pair has rebounded in the past few days. It has moved from a low of 1.3000 in November to the current 1.3300.
The pair has moved above the 50-day and 100-day Exponential Moving Averages (EMA). Also, the Supertrend indicator has turned green, which is a highly bullish sign.
The pair is between the lower two lines of the Andrew’s pitchfork tool. There are also signs that the pair is slowly forming a bullish flag or pennant pattern. It is also nearing the 23.6% Fibonacci Retracement level.
Therefore, the most likely scenario is where it continues rising as bulls target the psychological point at 1.3500. A move below the 50-day moving average at 1.3250 will invalidate the bullish outlook.
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