Bullish View
- Set a buy stop at 1.4180 and a take-profit at 1.4250.
- Add a stop-loss at 1.4120.
- Timeline: 1-2 days.
Bearish View
- Set a sell-stop at 1.4150 and a take-profit at 1.4070 (S1 of pivot points).
- Add a stop-loss at 1.4200.
The GBP/USD is in a tight range as market participants reflect on the strong economic data from the United States and the UK. It is trading at 1.4170, which is slightly above last Friday’s low of 1.4110.
Strong Growth in US and UK
Recent economic numbers from the US and UK have been relatively positive. For example, recently, data by the ONS showed that the UK economy rebounded by 2.3% in March while the unemployment rate declined to 4.8%. Similarly, UK’s retail sales, inflation, and PMIs were relatively positive, which is a sign that the economy is doing better than expected.
The same trend is happening in the United States. Data published this month showed that the Consumer Price Index rose by 4.2% while the PPI rose by 6.2% in March. While employment numbers disappointed, flash data shows that the labour market is tightening.
For example, numbers by the Bureau of Labour Statistics showed that the number of vacancies was increasing. At the same time, the number of people filing for initial jobless claims has dropped to the lowest level since the pandemic started.
This week, there will be limited economic data from the UK. As such, happenings in the US will be the key driver of the GBP/USD pair. Later today, the Commerce Department will publish the latest new home sales numbers. Economists expect these numbers to show that new home sales declined from more than 1 million in March to 970k in April. This will be in line with the disappointing existing home sales numbers that were published on Friday.
The GBP/USD will also react to the ongoing discussions on US infrastructure spending. There are strong divisions about the proposed $1.7 trillion spending package. A deal will signify a stronger recovery of the American economy.
GBP/USD Price Analysis
The hourly chart shows that the GBP/USD pair has made some modest gains in the past few hours. It is trading at 1.4170, which is slightly above the ascending orange trendline. The pair is also slightly above the standard pivot point and the 25-period moving average. A closer look also shows that the pair is forming the right shoulder of the head and shoulders pattern. Therefore, there is a possibility that the pair will retreat as bears target the first support of the pivot point at 1.4070. However, this pattern will be invalidated if it moves above 1.4200.
