Bullish view

• Buy the GBP/USD pair and set a take-profit at 1.2600.
• Add a stop-loss at 1.2330.
• Timeline: 1-2 days.

Bearish view

• Set a sell-stop at 1.2450 and a take-profit at 1.2350.
• Add a stop-loss at 1.2600.

(Click on image to enlarge)

The GBP/USD surged after a report showed that the British economy started the year well and as the US dollar crash continued. The pair soared to the psychologically important resistance level at 1.2500, up from this month’s low of 1.2105.
 

Federal Reserve decision and key economic data

The GBP/USD pair continued rallying, a sign that the recent US dollar index surge has eased. These gains happened after Donald Trump embraced a cautious tone on tariffs on imported goods from key countries, including the UK.

While he has threatened higher tariffs, analysts expect him to force countries into negotiations. Besides, tariffs would hit Americans hard. Companies usually compensate for tariffs by hiking prices raising inflation.

The GBP/USD pair also rose after the UK published encouraging manufacturing and services PMI data. According to S&P Global, the services PMI rose from 50.4 in December to 50.9 in January. The services PMI jumped from 47 to 48.2, while the composite PMI figure rose from 50.4 to 50.9. These numbers meant that the economy was doing well this year.

The next important catalyst for the GBP/USD pair will be the Federal Reserve's interest rate decision. Economists expect the bank to keep rates at 4.50% to maintain its data dependence.

The pair will also react to several key economic data from the US. On Tuesday, the Conference Board will release the latest consumer confidence data, which is important because consumer spending is the biggest part of the US economy.

The upcoming US GDP and personal consumption expenditure (PCE) data will be the other key economic numbers to watch.
 

GBP/USD technical analysis

The GBP/USD exchange rate rallied to 1.2500, its highest level since January 7 and much higher than this month’s low of 1.2100. It has flipped the key resistance level at 1.2300, its lowest level in April last year.

The pair moved to the strong, pivot, and reverse point of the Murrey Math Lines tool. It has also jumped above the 25-day moving average, while the two lines of the Percentage Price Oscillator have formed a bullish crossover.

Therefore, the pair will likely continue rising as bulls target the major S&R pivot point at 1.2695. A move below the support at 1.2300 will invalidate the bullish view.

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