Bullish view
Buy the GBP/USD pair and set a take-profit at 1.3450.
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 1.3450.
The GBP/USD pair rose for the second consecutive day, reaching a high of 1.3410, up modestly from this week’s low of 1.3310. This rebound happened as crude oil prices retreated ahead of the US consumer inflation report. It remains 2% below last month’s high of 1.3657.
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US Consumer Inflation Data Ahead
The GBP/USD rose as crude oil prices pulled back after the US confirmed that more ships were passing through the Strait of Hormuz. As a result, data shows that Brent and the West Texas Intermediate (WTI) dropped to $89.9 and $85, respectively.
Still, it is unclear whether the retreat will continue in the coming days or weeks as traffic through the Strait will take months to recover.
The next important catalyst to watch will be the upcoming US consumer inflation report, which will come out later today. Economists expect the report to show that inflation continued rising last month. Precisely, the general view among analysts is that inflation jumped to over 4% in May.
The US will next publish the latest Producer Price Index (PPI) on Thursday, with economists expecting the report to show that it rose 6.4% in May. It rose to a multi-year high of 6.0% in April as energy prices jumped.
These numbers come at a time when US bond yields are rising, with analysts expecting the bank to hike interest rates in the coming months. The two-year yield has jumped to over 4.1%, while the ten-year has moved to 4.52%.
The other key catalyst for the GBP/USD pair will be the upcoming UK GDP data. Economists expect the numbers, which will come out on Friday, to show that the economy contracted by 0.1% in April as inflation remained at an elevated level.
GBP/USD Technical Analysis
The daily chart shows that the GBP/USD pair has rebounded in the past two days. This rebound happened after the pair formed a double-bottom pattern at 1.3310 and a neckline at 1.3500, its highest point on May 25.
The pair has remained slightly below the 50-day Exponential Moving Average (EMA). It also remains slightly below the Woodie pivot point of 1.3470.
Therefore, the double-bottom pattern points to more gains, potentially to the pivot point at 1.3470. A move below the support level at 1.3310 will invalidate the bullish outlook.
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