Bullish View
- Buy the GBP/USD pair and set a take-profit at 1.3800.
- Add a stop-loss at 1.3600.
- Timeline: 1 day.
Bearish View
- Set a sell-stop at 1.3650 and a take-profit at 1.3550.
- Add a stop-loss at 1.3750.
The GBP/USD pair held steady on Thursday morning as investors reacted to the latest American consumer inflation data. The pair rose to a high of 1.3690, which was the highest level since November 3rd last year. It has risen by over 4% above the lowest level in December.
US Inflation Data
The GBP/USD jumped as the US dollar declined broadly. This performance was mostly because of the latest data by the American government. The data showed that the country’s consumer prices continued rising in December as the Omicron continued to cause supply chain disruptions.
The headline consumer price index (CPI) rose from 6.8% in November to 7.0% in December. This increase was in line with what analysts were expecting. It was also the highest figure since 1982. On a month-on-month basis, inflation dropped from 0.8% to 0.5%.
The core CPI, which excludes the volatile food and energy prices, rose from 4.9% in November to 5.5% in December. It rose slightly from 0.5% to 0.6% on a month-on-month basis.
These numbers are significantly above the Federal Reserve’s target of 2.0%. They also validate the fact that the rising inflation trend is no longer transitory.
In theory, the GBP/USD pair should have declined because of the rising inflation. Besides, the Federal Reserve chair warned that the Fed will quicken the hiking cycle if inflation remains stubbornly high.
Therefore, the pair jumped instead because there are some early signs that inflation has peaked. For example, data published on Wednesday showed that the consumer and producer price index in China declined sharply in December. This was a notable thing since China is one of the biggest American trading partners. Later today, the pair will react to the latest American producer price index (PPI) data.
GBP/USD Forecast
The four-hour chart shows that the GBP/USD pair has been in a strong bullish trend in the past few weeks. The gains accelerated on Wednesday after the US published its inflation data. It moved above the upper side of the ascending channel that is shown in blue.
The pair also rose above the 25-day and 50-day moving averages. The Relative Strength Index (RSI) managed to move above the overbought level.
Therefore, the pair will likely keep rising today as the bullish momentum continues. This will likely see it rise to the key resistance level at 1.3800.
