Bullish View
- Set a buy-stop at 1.2320 and a take-profit at 1.2400.
- Add a stop-loss at 1.2220.
- Timeline: 1-2 days.
Bearish View
- Set a sell-stop at 1.2250 and a take-profit at 1.2165.
- Set a stop-loss at 1.2320.
The GBP/USD price moved sideways last week even as the UK economy faced significant headwinds. It also remained in a tight range after the Fed Chair testimony to Congress and the Senate. It is trading at 1.2275, where it has been in the past few days.
UK Economy Under Pressure
Economic data published last week revealed that the UK economy is struggling. On Wednesday, numbers by the Office of National Statistics (ONS) showed that the country’s inflation surged to the highest point in over four decades. The overall inflation rose by 9.1% in May this year while core prices rose by 6.5%. These numbers are significantly higher than the Bank of England’s target of 2.0%.
And on Friday, data revealed that the country’s retail sales declined in May as inflation surged. The headline retail sales fell by 0.5% between April and May, erasing the previous month’s gains. Sales have dropped as 9 of 10 Britons said that they were spending less due to the rising cost.
Meanwhile, data published by Gfk showd that the country’s consumer confidence is slipping. Consumer confidence dropped by 1 point to minus 41 in June. This was the lowest reading in 48 years. As such, these numbers mean that the government’s aid has not done enough to bolster sentiment.
Therefore, with the UK facing a stagflation, there are concerns about what the Bank of England (BOE) will do in the coming months. The bank has already hiked interest rates in the past five meetings and analysts believe that the trend will continue.
The GBP/USD pair will then react to the latest US consumer confidence that are scheduled for Tuesday. Like in the UK, analysts expect the data to show that confidence dropped sharply in June as inflation rose.
GBP/USD Forecast
The four-hour chart shows that the GBP/USD pair has been in a consolidation phase in the past few days. It is trading at 1.2275, which is slightly below the important resistance at 1.2320, which was the highest point last week. The pair is also consolidating along the 50-day moving average and the middle line of Bollinger Bands.
The pair will likely remain in this range on Monday as investors watch for the upcoming US housing and consumer confidence data. A move above the resistance at 1.2300 will signal that bulls have prevailed and push the pair to June 16th high of 1.2400.
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