Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.1200.
- Add a stop-loss at 1.1492.
- Timeline: 1-2 days.
Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.1500.
- Add a stop-loss at 1.1200.
The GBP/USD price remained in a consolidation phase as investors reacted to the outcome of the American midterm election. It was trading at the important support level of 1.1400 on Thursday, which was slightly below this week’s high of 1.1591.
US inflation data ahead
The GBP/USD price retreated slightly after the relatively poor show by Republicans in this week’s midterm election. Results show that they will retake the House of Representatives but at a smaller margin than what most analysts were expecting. Control of the Senate is still unclear.
These results mean that the American government will not implement any major change in the next two years. To do that, Biden will need to do deals with Republicans in the House and Senate.
The next key catalyst for the GBP/USD pair will be the upcoming American consumer inflation data. Economists polled by Bloomberg expect that inflation remained at an elevated level in October. The median estimate is that the headline CPI rose from 0.4% to 0.6% in October, leading to a year-on-year increase of 8.0%.
Excluding the volatile food and energy products analysts expect that CPI inflation dropped to 0.5% and 6.5% on a MoM and YoY basis, respectively. These figures will be significantly higher than the Federal Reserve target of 2%.
Inflation is being driven by several factors like elevated oil and gas prices, food, and rent. Some products like used car prices and discretionary items have started retreating.
These inflation numbers are important because the Fed committed to be data-dependent when making its next decisions. In that meeting, the bank hiked rates by 0.75% and hinted that it will maintain higher rates for a longer period. These numbers will come a few days after the Bureau of Labor Statistics published mixed jobs data.
GBP/USD forecast
The GBP/USD pair has pulled back in the past few hours. This decline happened after the pair formed what looks like a double-top pattern. It has now moved below the important support at 1.1492, the highest point on October 5.
The pair also moved slightly below the 50-day moving average and the Ichimoku cloud. At the same time, the Stochastic Oscillator has moved to the oversold level. Therefore, the pair will likely continue falling as sellers target the support at 1.1200. This price is along the ascending trendline shown in green.
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