The pair will likely keep rising as bulls target the first resistance level at 1.2450.
Buy the GBP/USD and set a take-profit at 1.2450.Add a stop-loss at 1.2150.Timeline: 1-2 days.
Set a sell-stop at 1.2170 and a take-profit at 1.2100.Add a stop-loss at 1.2250.
The GBP/USD price tilted upwards after the latest UK consumer price index data and testimony by Jerome Powell, the Fed Chair. It is trading at 1.2283, which is slightly above this week’s low of 1.2162.
BOE in a Fix
The GBP/USD price rose slightly after the latest inflation data from the UK. According to the Office of National Statistics (ONS), the country’s consumer inflation rose to a multi-decade high of 9.1%. This was the highest level that consumer prices have surged in over 40 years.
The country’s inflation was driven by the soaring food and energy prices. Indeed, excluding the two, the country’s inflation declined from 6.2% to 5.9%. Analysts were expecting this inflation to drop to 6.0%.
Analysts expect that the country’s inflation will keep rising in the coming months. The Bank of England expects that inflation will rise to over 10% in the next few months.
Therefore, the Bank of England is in a fix considering that the country is now in a period of stagflation. Stagflation is a period when slow economic growth is accompanied by high inflation. As such, hiking interest rates as the BOE has pledged, will have a negative impact on the UK economy.
The GBP/USD pair also rose after the latest testimony by Jerome Powell. In his statement, Powell said that the bank will continue hiking interest rates until it sees that inflation was falling to its target at 2%. He also warned that these hikes will likely lead to a recession. Powell’s testimony will continue on Monday.
Investors will also focus on the latest flash manufacturing and services PMI data. Analysts expect the data to show that the UK and US PMIs remained above 50 even as the cost of doing business soared.
The GBP/USD pair formed a small hammer pattern on Wednesday. The lower side of this hammer pattern was at 1.2165, which was the lowest level in May. The pair is along the 25-day and 50-day moving averages. It has also moved slightly above the Woodie pivot point that is shown in blue while the Stochastic Oscillator has moved slightly above the neutral point.
Therefore, the pair will likely keep rising as bulls target the first resistance level at 1.2450. A drop below the key support at 1.2160 will invalidate the bullish view.