Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.2850.
- Add a stop-loss at 1.2650.
- Timeline: 1-3 days.
Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.2650.
- Add a stop-loss at 1.2825.
The GBP/USD exchange rate was little changed on Monday after the US released its April’s Personal Consumption Expenditure (PCE) inflation data. It also consolidated after a report by the CFTC showed that hedge funds turned bullish on the sterling.
UK and US manufacturing PMI data
The GBP/USD pair had a mild reaction when the US released its PCE inflation report on Friday. According to the BLS, the headline PCE index rose 0.3% in April, in line with expectation. It rose 2.7% on a YoY basis.
Excluding the volatile food and energy prices, the PCE inflation figure rose 0.2% in April. This performance is in line with what Jerome Powell and other Fed officials have argued. They have argued that inflation is falling but finding bumps along the way.
Most recent Fed speakers have said that they will maintain their data-dependence when determining when to cut interest rates. Analysts expect that the Fed will hold interest rates steady for a while and then start cutting rates in the fourth quarter.
The GBP/USD pair also moved sideways after the recent CoT report. According to the CFTC, hedge funds and other speculators turned positive on the sterling for the first time in weeks. Their positions rose to 25.4k after remaining bearish in the past four straight weeks.
Looking ahead, the S&P Global will publish the UK and US manufacturing PMI numbers. Based on the flash PMI figures, estimates are that the UK figure rose to 51.3 and 50.9, respectively. The ISM manufacturing figure is expected to come in at 50.0.
The US will release the official nonfarm payrolls (NFP) data on Friday. Economists expect the data to show that the economy added over 150k jobs in May.
GBP/USD technical analysis
The GBP/USD exchange rate has risen gradually in the past few days as it moved from April’s low of 1.2305 to over 1.2742. It has jumped above the ichimoku cloud indicator and the 50-day moving average.
The two lines of the MACD and the Awesome Oscillators have moved above the neutral level, signalling that bulls are in control. It has also remained slightly below the descending trendline, which connects the highest swings since July 2023.
Therefore, the pair will likely have a bullish breakout as buyers target the key resistance at 1.2880, its highest swing on March 8th.
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