Buy signal
- Buy the GBP/USD and add a take-profit at 1.4165 (last week’s high).
- Add a stop loss at 1.4000 (important support).
- Timeline: 1-2 days.
Sell signal
- Set a sell-stop at 1.3985 and a take-profit at 1.3900.
- Add a stop-loss at 1.4165.
The GBP/USD price will be in the spotlight this week as US inflation concerns linger and the UK publishes several important economic numbers. The pair is trading at 1.4097, which is 0.67% above the important support at 1.400.
UK employment numbers and inflation ahead
In the past two weeks, the GBP/USD pair reacted to the mixed employment and inflation data from the United States. The data showed that the US unemployment rate rose surprisingly in April this year while inflation rise at the fastest pace since 2008. The producer price index (PPI) also rose at the fastest pace since 2011.
This week, focus will shift to the United Kingdom, which is expected to publish its inflation and employment numbers. On Tuesday, data by the Office of National Statistics (ONS) is expected t show that the unemployment rate declined from 4.9% in February to 4.7% in March. This is a relatively strong number that is being supported by the government’s furlough program.
At the same time, analysts expect that the number of claimant count is expected to decline since the UK is winding down its lockdowns. Wages, too, are expected to show some improvements.
The data will be followed by the country’s inflation data that will come out on Wednesday. Like in the United States, economists expect the data to show that the headline CPI rose by 0.5% on a month-on-month basis, leading to an annualised gain of 1.4%. The core CPI is expected to rise by 0.3% and by an annualized rate of 1.2%. These numbers will be lower than the 2.0% target by the Bank of England.
Finally, the GBP/USD pair will react to the latest retail sales numbers from the UK that will come out on Friday. The focus will be on the month-on-month increase, which is expected to come in at 4.0%. The YoY number will not be important because sales dropped sharply in April 2020 amid the pandemic.
GBP/USD technical forecast
On the four-hour chart, we see that the GBP/USD pair rallied to 1.4165 last week after the Scottish parliamentary election. The pair then retreated and tested the important support at 1.400 and then bounced back. Today, the upward trend is being supported by the 25-day and 50-day exponential moving averages (EMA) while the two lines of the MACD are above the neutral line. Therefore, there is a possibility that bulls will attempt to retest last week’s high at 1.4165.
