Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.2340.
- Add a stop-loss at 1.2165.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.2245 and a take-profit at 1.2100.
- Add a stop-loss at 1.2325.
The GBP/USD price was wavering on Monday as investors waited for the most economic events of this month. It was trading at 1.2265, which was slightly below this month’s high of 1.2345. Sterling has risen by almost 10% from the lowest level in November.
Fed and BoE decision
The GBP/USD pair has been in a tight range as investors waited for key economic data from the US and the UK. It will also react to the latest interest rate decision by the Bank of England (BoE) and the Federal Reserve.
The Fed will deliver the latest interest rate decision on Wednesday. Economists expect that the Fed will hike interest rate by 0.50% after delivering 0.75% in the past four straight meetings. It will also continue with its quantitative tightening (QT) policies that has seen it reduce its balance sheet substantially.
The decision will come a day after the US publishes the latest consumer inflation data. Economists expect that the headline consumer price index (CPI) dropped from 0.4% from October to 0.3% in November. On a YoY basis, economists expect that the CPI declined from 7.7% to 7.3%. Core CPI is expected to drop from 6.3% to 6.1%.
The GBP/USD price will react to the latest economic data from the Bank of England. Economists expect that the headline CPI dropped from 11.1% in October to 10.9% while core CPI dropped from 6.5% to 6.4%. The meeting will be followed by the BoE decision. Economists expect that the bank will hike interest rate by 50 basi points to 3.50%.
Therefore, this will be an important week for the GBP/USD. The headline rate hikes will not have an immediate impact on the pair. Instead, it will react to the bank’s outlooks of future rate hikes.
GBP/USD forecast
The four-hour chart shows that the GBP/USD price has been in a bullish trend in the past few weeks. It has formed an ascending channel shown in black. It remains above the 25-day and 50-day moving averages and is slightly above the lower side of the channel. The Relative Strength Index (RSI) has continued rising.
Therefore, the pair will likely continue rising as buyers target the key resistance level at 1.2350. A drop below the support at 1.2175 will invalidate the bullish view.
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