Bullish View
Buy the GBP/USD pair and set a take-profit at 1.3510.
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 1.3510.
The GBP/USD pair rose modestly in the past few days as traders waited for the upcoming US retail sales data, Federal Reserve and Bank of England (BoE) decisions, and UK consumer inflation report. It rose to 1.3425, a few points above this month’s low of 1.3308.
UK Inflation, US Retail Sales, BoE and Fed Interest Rate Decisions
The GBP/USD pair drifted upwards as investors waited for crucial events this week. The first one will be the UK consumer inflation report. Economists expect the data to show that the headline CPI jumped 3.1% in May from 2.8% in the previous month. Core inflation, which excludes the volatile food and energy prices, is expected to rise 2.6% from the previous 2.5%.
If these numbers are correct, it means that inflation is moving further away from the Bank of England’s target of 2.0%. Such a move will likely put more pressure on the bank to maintain a hawkish tone when it concludes its meeting on Thursday this week.
On the positive side, there are signs that inflation may have peaked now that crude oil and natural gas prices have started falling. Brent and the West Texas Intermediate (WTI) fell below $80 a barrel after the US announced a MoU with the Iranians.
The other important catalyst for the GBP/USD pair will be the upcoming US retail sales report. Economists believe that retail sales rose modestly 0.6% MoM in May from the previous 0.5%. Excluding autos, sales are expected to rise 0.6%.
The US will also publish pending home sales report. Economists believe that sales rose by 3.0% from the previous 3.2%. These numbers come ahead of the Fed interest rate decision. The bank is expected to leave rates unchanged between 3.50% and 3.75%.
GBP/USD Technical Analysis
The daily chart shows that the GBP/USD pair has crawled back in the past few days, moving from a low of 1.3308 on June 8 to the current 1.3425. It has also formed a double-bottom pattern, a popular bullish reversal sign in technical analysis.
The pair has stalled along the 50-day and 25-day moving averages. It is along the 50% Fibonacci Retracement level. Therefore, the pair will likely continue rising, with the next key target to watch being the double-bottom pattern at 1.3506. A move above that level will point to further gains towards 1.3600.
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