Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.3785.
- Add a stop-loss at 1.3550.
- Timeline: 1-2 days.
Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.3550.
- Add a stop-loss at 1.3785.
The GBP/USD exchange rate wavered after a report showed that the UK economy slowed in the fourth quarter of last year. It also remained in a tight range after a report showed that the US inflation pulled back in January, raising the possibility of more Federal Reserve interest rate cuts this year. It was trading at 1.3655, down from the year-to-date high of 1.3870.
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UK Inflation and FOMC Minutes Ahead
The GBP/USD exchange rate will likely be highly volatile this week as the Federal Reserve publishes minutes of the last meeting on Wednesday. These minutes will likely shed more color on what to expect in the coming meetings.
They will come out a week after the US released the most important data in the economic calendar. The report showed that the economy created 130k jobs in January, with healthcare adding the most jobs in this period. The manufacturing sector added 5,000 jobs, while the government continued to shed jobs.
Another report showed that the headline Consumer Price Index (CPI) dropped from 2.7% in December to 2.4% in January. Inflation has been in a strong downward trend in the past few months, meaning that Trump’s tariffs have not had a major impact on inflation.
The next key catalyst for the GBP/USD pair will be the upcoming UK jobs data on Tuesday. Economists expect the report to show that the unemployment rate remained unchanged at 5.1%, while the economy created over 82k jobs in December.
The pair will also react to the upcoming UK inflation report, which are expected to show that inflation retreated from 3.4% to 3.0%, while the core CPI 3.2% to 3.1%. Economists expect the UK inflation will continue falling in the coming months, with ING predicting that it will move to the 2% target in the coming months.
GBP/USD Technical Analysis
The daily timeframe chart shows that the GBP/USD pair retreated from the year-to-date high of 1.3870 to the current 1.3655. It has moved below the important support level at 1.3785, its highest level in July last year.
The pair has formed an inverted head-and-shoulders pattern, a common bullish reversal sign in technical analysis. It has also remained above the 50-day and 100-day Exponential Moving Averages (EMA).
Therefore, the pair will likely bounce back in the coming days, potentially to the key resistance level at 1.3785, its highest level in September last year.