Bullish view
Buy the GBP/USD pair and set a take-profit at 1.3600.
Add a stop-loss at 1.3400.
Timeline: 1-2 days.
Bearish view
Sell the GBP/USD pair and set a take-profit at 1.3400.
Add a stop-loss at 1.3600.
The GBP/USD pair rose for the third consecutive day as the US dollar softened after last week’s US nonfarm payrolls (NFP) data. It rose to 1.3510, up by nearly 2% from its lowest point in July as focus shifts to the upcoming US inflation and UK GDP reports.
US Inflation and UK GDP Data Ahead
The GBP/USD pair jumped as traders waited for the latest consumer inflation report that comes out on Wednesday this week. Economists expect the report to show that the headline Consumer Price Index (CPI) rose from minus 0.4% in June to 0.1% in July, while the core CPI moved from 0.0% to 0.2%. On an annual basis, the two figures are expected to be 3.4% and 2.5%, respectively.
US inflation has remained above the 2% target in over five years. As a result, some Federal Reserve officials have supported hiking interest rates. In a statement on Monday, Beth Hammack of the Cleveland Fed, said that she supported hiking interest rates to bring the headline CPI to the 2% target. Three officials voted to hike rates in the last meeting.
Inflation may remain high for a while as the standoff between the US and Iran escalated. Iran is pressing for reparations, end of the blockade, and for the US to leave the region to reopen the Strait. As a result, oil prices started rising, with Brent hitting the key resistance at $87.
The case for hiking interest rates faded after the US published its nonfarm payrolls (NFP) report. According to the Bureau of Labor Statistics (BLS), the economy lost over 23k jobs in July, much lower than what analysts were expecting.
The GBP/USD pair will next react to the UK GDP report that comes out on Thursday this week. This report will provide more information about the state of the economy and what to expect later this year.
GBP/USD Technical Analysis
The daily chart shows that the GBP/USD pair bottomed at 1.3135 in June and then bounced back to the current 1.3500. It has moved above the 50-day moving average, which is now providing it with substantial support.
The pair has also formed an inverted head-and-shoulders pattern, a common bullish reversal sign in technical analysis. It has remained above the Ichimoku cloud and the Supertrend indicators.
Therefore, the path of the least resistance is bullish, with the next level to watch being the psychological level of 1.3600.
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