Bearish View
Sell the GBP/USD and set a take-profit at 1.3380 (S1).
Add a stop-loss at 1.3600.
Timeline: 1-2 days.
Bullish View
Set a buy-stop at 1.3540 and a take-profit at 1.3700.
Add a stop-loss at 1.3400.
The GBP/USD price declined as investors reflected on the strong US inflation data. Focus shifts to the upcoming UK GDP numbers that will come out in the morning session. It is trading at 1.3515, which is about 0.70% below the highest level this week.
US Inflation Rebounded
The world is going through a period of high consumer prices. On Wednesday, data by the American statistics agency showed that the headline Consumer Price Index (CPI) rose by 6.2% in October. This increase was the highest it has been in more than 30 years. It was also substantially higher than what analysts were expecting.
Meanwhile, core CPI, which strips the relatively volatile food and energy prices, rose by 4.6% in October. The number was also higher than what most analysts were expecting. It was also higher than what the Federal Reserve was expecting.
Therefore, these numbers show that inflation has been relatively stubborn this year and the situation could get worse. In addition to the ongoing supply shortages and higher oil prices, the recently-signed infrastructure package will help to spur inflation.
As such, there is a likelihood that the Federal Reserve will turn more hawkish in the coming meetings. In the past monetary policy meeting, the bank decided to taper by about $15 billion. But it also left room for more tapering if inflation remains high as it currently is.
Meanwhile, the GBP/USD pair will react to the latest UK GDP numbers that will come out in the morning session. Analysts expect these numbers to show that the UK GDP rose by 1.5% on a quarter-on-quarter basis. This will be significantly lower than its Q2 recovery of 5.5%. On a year-on-year basis, the economy expanded by 6.8%.
GBP/USD Forecast
The four-hour chart shows that the GBP/USD pair has been in a bearish trend in the past few hours. The pair has moved from this week’s high of 1.3608 to a low of 1.3510. The pair has also moved below the 25-day and 50-day moving average. It has also moved below the standard pivot point while the Relative Strength Index (RSI) has also declined.
Therefore, the pair will likely keep falling as bears target the first support of the standard pivot point at 1.3385. On the other hand, a move above the key resistance at 1.3580 will invalidate the bearish view.
