Bullish view
Buy the GBP/USD pair and set a take-profit at 1.3650.
Add a stop-loss at 1.3450.
Timeline: 1-2 days.
Bearish view
Sell the GBP/USD pair and set a take-profit at 1.3450.
Add a stop-loss at 1.3650.
The GBP/USD pair wavered after the UK published strong economic numbers and after the US released strong inflation numbers. It trades at 1.3525 on Monday, as focus now remain on the upcoming Federal Reserve and Bank of England (BoE) interest rate decisions.
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BoE and Fed Decisions Ahead
The GBP/USD pair remained in a tight range after the UK published strong economic numbers. A report by the Office of National Statistics (ONS) showed that the economy did well in July, helped by the ongoing artificial intelligence rollout.
The economy grew by 0.4% in the quarter, slightly higher than what analysts were expecting. The closely watched services sector grew by 0.4% during the quarter as companies continued spending on AI technology.
These numbers came as the new administration prepares its October budget. It also came as the UK government bond yields continued rising. The ten-year yield jumped to 5.4%, its highest level since July 2007, raising the cost of the government to service its debt.
The GBP/USD pair reacted to the latest US inflation data, which was higher than what analysts were expecting. The report showed that the core CPI rose 0.4% in August, slightly higher than what analysts were expecting.
US inflation will likely remain at an elevated level since energy prices have continued rising this month. The average gasoline price has risen to $4.3 a gallon, while diesel has jumped to a record high of $6.
Therefore, most market participants believe that the Fed will decide to hike interest rates in this meeting. Odds are that it will hike by 25 basis points to between 3.75% and 4% as it seeks to curb inflation, a move that will infuriate Trump, who has called for the bank to cut rates.
GBP/USD Technical Analysis
The daily chart shows that the GBP/USD pair has remained under pressure in the past few days. It has slipped from a high of 1.3675 to the current 1.3525, which is along the lower side of the ascending channel.
The pair has remained slightly above the 50-day Exponential Moving Average (EMA), which has provided it with substantial support. It also remains above the Supertrend indicator.
Therefore, the pair will likely rebound, potentially to the resistance level of 1.3650. A break below the lower side of the ascending channel will invalidate the bullish outlook.
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