Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.3565.
- Add a stop-loss at 1.3300.
- Timeline: 1-2 days.
Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.3300.
- Add a stop-loss at 1.3565.
The GBP/USD exchange rate rose as the US dollar index retreated after Donald Trump announced that there was no going back on his campaign to take over Greenland. It rose to a high of 1.3450, also as traders waited for key UK macro data.
US Dollar Slips as the Greenland Crisis Escalates
The GBP/USD exchange rate held steady as investors reacted to a statement by Donald Trump on the future of Greenland. He insisted that there was no going back on the US bid to take over the island, a move that most Americans are opposed to.
Trump has ramped up the rhetoric recently, including by announcing that the US would impose tariffs on countries that sent a few military officials to the island last week.
The GBP/USD pair also rose slightly after the UK published encouraging jobs numbers. According to the Office of National Statistics (ONS), the country's unemployment rate remained unchanged at 5.1% in November as the country created 82k jobs. It had shed over 16k jobs in the previous month.
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The next key catalyst for the GBP/USD pair will be the upcoming UK consumer inflation report. Economists polled by Reuters expect the data to show that the headline Consumer Price Index (CPI) rose from 3.2% in November to 3.3% in December, while the core CPI remained unchanged at 3.2%.
UK’s inflation has remained above the 2% target for years and the Bank of England (BoE) believes that prices will remain above it in the foreseeable future. While this report will be important, chances are that it will not have an impact on the next action of the BoE.
The GBP/USD pair will also react mildly to the upcoming US mortgage and pending home sales data. Economists expect the data to show that pending home sales rose by 1.4% in December, much lower than the previous month's 3.3%.
GBP/USD Technical Analysis
The daily timeframe chart shows that the GBP/USD pair held steady as the US dollar index continued falling. It rose to a high of 1.3445, up from this month's low of 1.3340.
The pair has formed a bullish flag pattern, which is made up of a vertical line and a descending channel. This pattern resembles a hoisted flag and often leads to more upside.
The pair has moved above the 50-day and 100-day Exponential Moving Averages (EMA) and the 23.60% Fibonacci Retracement level.
Therefore, the pair will likely continue rising as bulls target the key resistance level at 1.3565. A move above that target will point to more gains to the Ultimate Resistance level of the Murrey Math Lines tool at 1.3670.
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