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The pair will likely retest the upper side of the channel and then resume the bullish trend.
Bullish View
Set a buy-stop at 1.2020 and a take-profit at 1.2100.Add a stop-loss at 1.1890.Timeline: 1-2 days.
Bearish View
Set a sell-stop at 1.1890 and a take-profit at 1.1800.Add a stop-loss at 1.2040.
The GBP/USD held steady on Monday and Tuesday morning as investors waited for the upcoming data from the UK. The pair rose to a high of 1.2032, which was the highest level since July 7th. It has risen sharply from this week’s low of 1.1763.
UK Jobs and Inflation Data
The GBP/USD pair rose as the US dollar paused its strong rebound. The dollar index, which surged to a two-decade high of $109.30, pulled back to about $107.20. This price action happened as investors assessed last week’s US economic data and predicted what the Fed will do later this month.
Data published last week revealed that the country’s inflation jumped to a four-decade high of 9.1%. Further numbers showed that the country’s retail sales rose while the unemployment rate remained at 3.7%. As such, investors started pricing in a 100 basis point hike by the Federal Reserve.
The dollar pulled back after Fed’s Christopher Waller and Esther George warned that a 100 basis point hike will be too much. Therefore, there is a likelihood that the bank will hike by either 0.50% or 0.75% next week.
The GBP/USD pair rose as investors waited for the upcoming UK inflation and jobs data. The jobs data scheduled for Tuesday are expected to show that the unemployment rate rose from 3.8% to 3.9%. They also expect the numbers will show that average earnings minus bonus rose by 4.3%. Analysts also expect that average earnings plus bonus fell to 6.7%.
These numbers will be followed by the latest UK inflation data scheduled for Wednesday. Analysts expect the data to show that the country’s inflation surged to 9.1% in June. Therefore, there is a likelihood that the Bank of England (BoE) will hike interest rates by 0.50% in its August meeting.
GBP/USD Forecast
The GBP/USD pair rose to a high of 1.2035, which was higher than last week’s low of 1.1768. The pair managed to move above the upper side of the descending channel that is shown in red. It also moved slightly above the 25-day moving average while the Relative Strength Index (RSI) is approaching the overbought level.
The Average Directional Index (ADX) has tilted lower. Therefore, the pair will likely retest the upper side of the channel and then resume the bullish trend. If this happens, the next key resistance point to watch are at 1.2200.
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