Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.2850.
- Add a stop-loss at 1.3030.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.2985 and a take-profit at 1.3035.
- Add a stop-loss at 1.2900.
The GBP/USD currency pair wavered at its highest level since July last year as the odds of a Federal Reserve interest rate cut rose after the latest US retail sales data. The exchange rate was trading at 1.2967, a few pips below this week’s high of 1.3000.
UK inflation data ahead
The GBP/USD pair moved sideways after the US released the latest retail sales data. According to the Department of Commerce, the headline retail sales remained unchanged in June, beating the expected drop of 0.3%.
Core retail sales, which excludes the volatile food and energy, rose by 0.4% in June after growing by 0.1% in the previous month. While these numbers were higher than expected, they confirmed that consumer spending was slowing.
Therefore, there are rising odds that the Federal Reserve will start cutting interest rates in September. The swap market and the Fed rate monitor tool showed that odds of that rate cut rose to 100%.
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In a statement on Monday, Jerome Powell welcomed the recent encouraging inflation data and expressed concerns about the US labor market. Recent data revealed that the jobless rate rose to 4.1%, its highest point since 2021.
The next important GBP/USD news will be the upcoming UK inflation data. Economists expect the data to show that the headline CPI dropped from 0.3% in May to 0.1% in June. They expect it to drop from 2.0% to 1.9% on a YoY basis.
The core CPI is expected to have improved from 3.5% to 3.4% in June. These numbers will help the Fed to determine whether the Bank of England will start cutting rates in its upcoming meeting.
In a recent statement, the bank’s chief economist, Huw Pill, has warned that interest rates could be delayed since the core inflation remains at an elevated level.
GBP/USD technical analysis
The GBP/USD exchange rate has been in a strong bull run in the past few weeks. It recently rallied above the key resistance point at 1.2826, the neckline of the inverse head and shoulders pattern.
The pair has crossed the second resistance of the Woodie pivot point and the 50-day Exponential Moving Average (EMA). Also, the Relative Strength Index (RSI) and the Stochastic Oscillator have moved to the overbought point.
Therefore, will bulls looking exhausted, the pair will likely retreat and retest the support at 1.2826. That break and retest pattern is a popular continuation signs.
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