Bullish View
Buy the GBP/USD and set a take-profit at 1.3540 (pivot point).
Add a stop-loss at 1.3350.
Timeline: 1-2 days.
Bearish View
Set a sell-stop at 1.3380 and a take-profit at 1.3300.
Add a stop-loss at 1.3450.
The GBP/USD pair is holding steady even as Brexit risks rise and as traders wait for major economic numbers from the UK. The pair is trading at 1.3418, which is about 0.45% above its lowest level last week.
Fresh Brexit Risks
The biggest risk for the GBP/USD is the fresh Brexit risks that have emerged in Europe. On Friday and during the weekend, the UK and the EU fired up the rhetoric about Northern Ireland.
The UK, led by Boris Johnson and David Frost, have argued that the Northern Ireland Protocol keeps the region inside Europe’s single market. The two have asked for fresh talks about the region. In a statement, Frost said that the UK could trigger Article 16 of the protocol.
By so doing, the two sides would move into a trade war, which would have serious implications for the two sides. The UK has demanded that the European Court of Justice should be removed from any regulatory role in the protocol.
Meanwhile, the GBP/USD is holding steady ahead of key economic data from the UK. On Tuesday, the Office of National Statistics (ONS) will publish the latest UK jobs numbers. Analysts expect the data to show that the country’s unemployment rate declined to 4.5% to 4.4%. Average earnings with bonuses are expected to have increased by 5.6% in September.
The ONS will also publish the latest UK consumer inflation data on Wednesday. Like in the US and Germany, analysts expect the data to show that the UK inflation jumped to more than 4% in October. Core inflation is also expected to rise from 2.9% to 3.1%. The ONS will also release the latest UK retail sales data on Friday.
GBP/USD Forecast
The four-hour chart shows that the GBP/USD pair has bounced back to 1.3418, which is slightly higher than the lowest level last week. This level is also important since it was the lowest level on October 1. At the same time, the pair has moved below the 25-day Exponential Moving Average (EMA) and the Ichimoku cloud. It is also between the descending channel shown in purple and is above the first support of the standard pivot points.
Therefore, the pair will likely hold stready as investors attempt to move above 1.3540, which is along the standard pivot point. On the flip side, a drop below 1.3350 will invalidate the bullish view.
