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 pair rose as the US dollar retreated ahead of the crucial Federal Reserve and Bank of England (BoE) interest rate decisions, which came out on Wednesday and Thursday. It rose to 1.3360, up substantially from this week's low of 1.3215.
Federal Reserve and Bank of England Decisions
The GBP/USD pair rose as the US dollar weakened a bit, with the DXY Index falling from $100.2 earlier this week to $99.20. The dollar dropped slightly as crude oil prices remained at a narrow range despite the escalation of the ongoing US-Iran war.
Looking ahead, the pair will be in the spotlight in the next two days as the Federal Reserve and Bank of England (BoE) deliver their second interest rate decisions of the year. The Fed is expected to leave interest rates unchanged between 3.50% and 3.75% as officials remain concerned about the ongoing inflation issues amid the ongoing war in the Middle East.
The US will publish the latest Producer Price Index (PPI) data before the meeting. Economists expect the data to show that the headline PPI will come out at 2.9%, while the core PPI rose to 3.7% in February.
While officials are concerned about the US inflation, they are also highly concerned about the labor market, which has worsened in the past few months, with the economy shedding over 92k jobs in February this year.
The Bank of England (BoE) is also expected to leave interest rates unchanged on Thursday. Before this war, there was hope that the bank would cut interest rates as inflation was starting to fall. This time, however, analysts expect that will maintain the status quo as inflation is expected to continue rising.
GBP/USD Technical Analysis
The daily chart shows that the GBP/USD pair bottomed at 1.3215 this week and then bounced back to 1.3360. It has remained below the 50-day and 100-day Exponential Moving Averages
On the positive side, the pair has formed an inverted head-and-shoulders pattern, which often leads to a bullish breakout. It recently completed forming the right shoulder of this pattern.
Therefore, the pair will likely continue rising in the coming days, with the next key target being at 1.3500. On the flip side, a drop below the right shoulder section at 1.3215 will invalidate the bullish outlook.