Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.2828.
- Add a stop-loss at 1.2685.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.2720 and a take-profit at 1.2650.
- Add a stop-loss at 1.2820.
The GBP/USD price rose for four straight days as the recent US dollar index (DXY) rally faded. The pair rose to a high of 1.2750 on Tuesday morning, higher than last week’s low of 1.2610.
US dollar index retreats
The US dollar index has pulled back in the past few days. It has dropped to $102, down from last week’s high of $102.50. This retreat has coincided with the performance of US bond yields. The 10-year yield retreated to 3.90% while the 30-year dropped to 4.15%.
The GBP/USD pair also rose as the price of crude oil continued falling. Brent, the global benchmark, dropped to $75.8 while West Texas Intermediate (WTI) fell to $70.47. Other energy commodities like natural gas and gasoline also continued falling.
Crude oil retreated after the latest decision by Saudi Arabia to slash prices in a bid to boost its market share. OPEC and non-OPEC members like the United States and Brazil are boosting production at a time when there are demand concerns.
This trend could help boost the country’s inflation numbers. In a statement on Monday, Raphael Bostic, the head of the Atlanta Fed, said that inflation was on track to hit the 2.0% target in the coming months. He also expects the economy to go through a soft landing.
Still, Bostic has advocated for higher interest rates for longer until inflation hits its 2% target. He expects at least 2% rate cuts this year.
His statement came a few days ahead of the latest US inflation data. Economists expect the data to show that the headline inflation rose slightly to 3.2% in December while core CPI retreated to 3.8%.
The other key GBP/USD news will be the upcoming statement by Andrew Bailey, the head of the Bank of England (BoE).
Top Forex Brokers
GBP/USD technical analysis
The GBP/USD pair has been in a strong upward trend in the past few days. On the 4H chart, it has remained above the ascending trendline, which connects the lowest point since October 26th. The pair has also risen above the 50-period moving average and the key resistance at 1.2732, the highest point on November 28th.
The Relative Strength Index (RSI) has risen above the neutral point of 50. Therefore, the pair will likely continue rising as buyers target the key resistance at 1.2828, its highest point in December.
Ready to trade our free daily Forex trading signals? We’ve shortlisted the best UK forex broker in the industry for you.