Bearish view
Sell the GBP/USD pair and set a take-profit at 1.3300.
Add a stop-loss at 1.3450.
Timeline: 1-2 days
Bullish view
Buy the GBP/USD pair and set a take-profit at 1.3450.
Add a stop-loss at 1.3300.
GBP/USD has stabilized in the past few days after the Federal Reserve and Bank of England (BoE) decisions. It also jumped after some notable macro numbers from the UK. It was trading at 1.3395, up modestly from this month’s low of 1.3336.
Top Regulated Brokers
Fed and Bank of England Divergence
The GBP/USD pair remained under pressure after the Fed and the BoE delivered their interest rate decisions. In its decision on Wednesday, Kevin Warsh and the team at the Fed, hiked interest rates by 0.25% to between 3.75% and 4%. It did that to confront the elevated inflation, which has remained above the 2% target in the past few years.
Economists now expect the bank to hike interest rates again this year, with most of them seeing it happening in December. Inflation has remained at an elevated level because of rising energy prices, with average diesel prices nearing the important milestone of $6.5. This is notable because the price crossed the $6 milestone less than two weeks ago.
The gasoline price has also remained at an elevated level, with the average figure rising to $4.4687. These prices will continue rising because of rising crude oil prices and shipping costs.
The GBP/USD pair also reacted to the Bank of England (BoE) interest rate decision, in which Andrew Bailey decided to leave rates unchanged. Analysts believe that the bank will hike rates in the next meeting since inflation is above the target.
Data released last week showed that the country’s inflation rate rose 3.1% in August, much higher than the 2% target. Another report showed that the country’s jobs market remained strong, while retail sales rose despite the rising inflation.
The GBP/USD pair will react to some important macro data from the US and the UK. Some of these numbers will be the latest flash manufacturing and services PMI numbers.
GBP/USD Technical Analysis
The four-hour chart shows that the GBP/USD pair has been under pressure in the past few months. This retreat started after the pair peaked at 1.3676 in August to the current 1.3395.
The pair has formed a small double-bottom pattern at 1.3336. In most cases, this pattern is one of the most bullish patterns in technical analysis. It also formed a bullish engulfing pattern.
The pair remains below the Supertrend indicator. Therefore, the path of the least resistance is still downwards, with the initial target to watch being at 1.3300.
Ready to trade our free trading signals? We’ve made a list of the best UK forex brokers worth using