The pair will likely resume the downward trend since it seems like it is forming an inverted cup and handle pattern.
Set a sell-stop at 1.3470 and a take-profit at 1.3400.
Add a stop-loss at 1.3550.
Timeline: 1-2 days.
Set a buy-stop at 1.3520 and a take-profit at 1.3600.
Add a stop-loss at 1.3450.
The GBP/USD pair was little changed on Monday morning as the market reflected on the mixed interest rate decision by the Bank of England (BOE), hawkish Fed decision, and the strong US jobs data. The pair is trading at 1.3500, which is slightly above last week’s low of 1.3427.
Sterling Pares Losses
The GBP/USD pair declined sharply last week after the BOE delivered a relatively surprising interest rate decision. Before the meeting, most analysts were expecting that the bank will either start hiking interest rates or start tapering its decision.
As such, the market was relatively surprised when the bank decided to leave interest rates and QE unchanged. More surprising is that the number of policymakers who voted to maintain policy unchanged was was relatively wide. Still, the bank hinted that higher interest rates were on the way.
The pair’s decline continued when the Federal Reserve decided to start tapering its asset purchases. It will continue slowing the purchases until mid next year. It then pared back some of these losses after the strong US jobs numbers.
Looking ahead, the GBP/USD will react to the latest US inflation numbers that are scheduled for Wednesday. The numbers are expected to show that the headline consumer inflation rose to a multi-year high of 5.8%. This will be the highest number since 2007. The core CPI is expected to have risen from 4.0% to 4.2%. The Fed expects that the country’s inflation will start falling in the coming year.
The GBP/USD pair will also react to the latest UK GDP data that will come out on Thursday. The data is expected to show that the economy expanded by 6.8% on a year-on-year basis. While this will be a strong number, it will also be lower than the previous 23.6%.
The GBP/USD pair tilted higher on Friday as some investors attempted to buy the dip. Notably, this rebound happened when the pair dropped to a low of 1.3425, which was a few pips above October’s low of 1.3410. Still, despite the jump, the pair remains significantly below last week’s high of about 1.3800. It also remains below the 25-day and 50-day moving averages.
Therefore, the pair will likely resume the downward trend since it seems like it is forming an inverted cup and handle pattern. The bearish trend will be confirmed when the pair moves below the key support at 1.3400.