Bullish Perspective
- Consider buying the GBP/USD pair with a take profit set at 1.3785.
- Place a stop loss at 1.3550.
- Timeframe: 1-2 days.
Bearish Perspective
- Think about selling the GBP/USD pair, aiming for a take profit at 1.3550.
- Set a stop loss at 1.3785.
The GBP/USD exchange rate experienced some turbulence following news that the UK economy slowed in the last quarter of the previous year. It has remained fairly steady after reports suggested a decrease in U.S. inflation in January, which may prompt the Federal Reserve to implement further rate cuts this year. Currently, it’s trading at 1.3655, a drop from its yearly peak of 1.3870.
Upcoming UK Inflation and FOMC Minutes
This week could bring considerable volatility to the GBP/USD exchange, especially as the Federal Reserve is set to release minutes from its last meeting on Wednesday. These insights could help market participants gauge future policy direction.
These minutes will follow the release of key economic data from the U.S. The latest reports indicate that 130,000 jobs were created in January, largely driven by the healthcare sector, while manufacturing saw an increase of about 5,000 jobs, despite job cuts in other government sectors.
Additionally, the composite consumer price index (CPI) decreased to 2.4% in January from 2.7% in December. The trend shows that inflation is on the decline, suggesting that recent tariffs have not significantly influenced price levels.
A major factor for the GBP/USD pair will be the UK jobs report due on Tuesday, which is anticipated to show the creation of over 82,000 jobs in December, with an unemployment rate holding steady at 5.1%.
Economists are also looking for the UK’s forthcoming inflation report, predicting a drop to 3.0% from 3.4%, and core CPI to fall from 3.2% to 3.1%. There’s a general expectation that inflation will continue to decline, with some forecasts suggesting it could approach the 2% target soon.
GBP/USD Technical Analysis
Looking at the daily timeframe, the GBP/USD pair has pulled back from its yearly high of 1.3870 to the current 1.3655. It’s trading below a critical support level of 1.3785, which was the highest mark reached last July.
The formation of an inverted head-and-shoulders pattern signals potential bullish reversal, a common sight in technical analysis. Moreover, it’s positioned above the 50-day and 100-day exponential moving averages (EMAs).
This suggests that the currency pair might rebound in the upcoming days, possibly reaching the significant resistance level at 1.3785, an all-time high recorded last September.
Chrispus Nyaga is a financial analyst and trader with over eight years in the field. He has experience with companies like ATFX, easyMarkets, and OctaFx, and has also contributed to several financial platforms. In his spare time, he enjoys watching golf and spending time with his family.
