Bullish view
Buy the GBP/USD pair and set a take-profit at 1.3545.
Add a stop-loss at 1.3350.
Timeline: 1-2 days.
Bearish view
Sell the GBP/USD pair and set a take-profit at 1.3350.
Add a stop-loss at 1.3545.
The GBP/USD exchange rate rose slightly as odds of a negotiated settlement between the United States and Iran rose. It jumped to 1.3417 on Wednesday, up from the year-to-date low of 1.3220.
Trump Hints of US-Iran Talks
The GBP/USD pair rose slightly after President Donald Trump hinted that the US would continue talking with Iran, noting that the latter had offered a “present” as a show of good faith in negotiations. He did not offer precise details of the offer but said it was oil related and was worth a “tremendous amount of money.”
The statement came a day after Trump paused his planned attack on Iran’s power infrastructure, citing that the two countries had agreed to continue talking.
Still, Iran has denied that it was talking with the United States and has continued to close the Strait of Hormuz to hostile traffic. It believes that it has an upper hand compared to the US because of the impact of energy prices. Also, Iran believes that the US would use negotiations to buy time and possibly launch an attack again.
Crude oil and natural prices retreated after Trump's statement. Brent dropped from $100 on Tuesday to $95, while the West Texas Intermediate (WTI) fell to $88.
The next key catalyst for the GBP/USD pair will be the UK consumer inflation report. Economists expect the upcoming data to show that the headline Consumer Price Index (CPI) rose 3% in February, while the core CPI rose 3.1%. The two are expected to come in at minus 0.5% and minus 0.6%, respectively.
UK’s inflation is expected to bounce back because of the ongoing war that has pushed gas prices in the UK to the highest point in years. As a result, analysts expect that the central bank will maintain higher interest rates for longer despite the ongoing stagflation concerns.
GBP/USD Technical Analysis
The four-hour chart shows that the GBP/USD pair has rebounded in the past few weeks, rising from the year-to-date low of 1.3220 to the current 1.3415. It has moved to between the 23.6% and 38.2% Fibonacci Retracement levels.
The pair has also formed an inverted head-and-shoulders pattern, a common bullish reversal sign in technical analysis. It has also moved above the 50-period Exponential Moving Average (EMA).
The pair remains slightly above the Ichimoku cloud indicator. It also rose above the Supertrend, a sign that bulls have prevailed. Therefore, the most likely scenario is where it continues rising, with the next key target being the 50% Fibonacci Retracement level at 1.3545.