Bullish View
- Buy the GBP/USD pair and set a take-profit at 1.3700.
- Add a stop-loss at 1.1.3560.
- Timeline: 2 days.
Bearish View
- Sell the GBP/USD and add a take-profit at 1.3520.
- Add a stop-loss at 1.3600.
The GBP/USD pair remained in a tight range in the Asian session as investors continued focusing on Ukraine’s crisis and positive economic numbers from the UK. It is trading at 1.3600, which is a few points below Monday’s high of 1.3638.
Strong UK Data
Most data published recently paint a picture of a British economy that is firing on all cylinders. Home prices have jumped to a record high while inflation has spiked to the highest point in over 3 decades. Similarly, the labor market is strong while retail sales jumped sharply in January.
On Monday, flash estimates by Markit showed that output by manufacturers and service providers rose sharply in February. The two PMIs rose to 57.3 and 60.8, respectively. They were also better than the median estimates of 57.2 and 55.5.
Markit attributed the strong performance to the optimism that the country was moving in the right direction as the government scaled down restrictions. Also, manufacturers were optimistic that the supply chain challenges were easing.
The situation will continue improving considering that Boris Johnson announced that the UK will end the remaining restrictions considering that most people in the UK have been vaccinated.
Therefore, with the UK economy this strong, analysts expect that the Bank of England will continue its tightening process. This means that it will implement at least three rate hikes later this year.
The key catalyst for the GBP/USD pair will be the ongoing crisis in Europe. If signs of an invasion rises, the pair will likely decline as investors move to the safety of the US dollar.
The pair will also react to the latest US consumer confidence and flash PMI data. Economists expect the numbers to reveal that confidence declined slightly in February because of inflation.
GBP/USD Forecast
The GBP/USD pair is trading at 1.3600, which is a few points below its weekly high of 1.3640. On the four-hour chart, the pair is slightly below the upper side of the ascending channel. It also moved slightly above the 25-day and 50-day exponential moving averages (EMA).
The pair is trading at the 23.6% Fibonacci retracement level. Therefore, at this point, the outlook for the pair is neutral, with a bullish bias. A move above the upper side of the channel will signal that bulls have prevailed. On the flip side, a drop to the lower side of the channel cannot be ruled out.
