Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.3130.
- Add a stop-loss at 1.2895.
- Timeline: 1-3 days.
Bearish view
- Set a sell-stop at 1.2985 and a take-profit at 1.2900.
- Add a stop-loss at 1.3065.
The GBP/USD exchange rate continued rising after the relatively strong UK inflation numbers and the dovish statements by the Federal Reserve officials. It soared to a high of 1.3045, its highest point since July 2023.
UK inflation data
The GBP/USD pair rose after the UK published relatively strong UK consumer inflation data. According to the Office of National Statistics (ONS), the headline Consumer Price Index (CPI) rose by 2.0% in June, higher than the expected 1.9%.
The core CPI, which excludes the volatile food and energy products, rose by 3.5% on an annualized basis. Also, this number was higher than the median estimate of 3.4%.
These numbers mean that the country’s inflation is still strong, meaning that the Bank of England (BoE) will likely maintain higher interest rates for longer.
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The data came a few days after Huw Pill, the bank’s chief economist, warned that the rate cut may not come as soon as expected. Before that, most analysts were expecting the bank to cut rates by 0.25% in the next meeting.
The GBP/USD exchange rate also rose after more dovish statements by Fed officials. Christopher Waller and John Williams said that the bank would likely start to cut interest rates soon if inflation continues falling.
Waller noted that while the Fed has not reached its final destination, it was getting closer to its target. In a recent statement, Jerome Powell said that the bank was now focusing on the labor market, which has softened in the past few months.
The unemployment rate rose to 4.1%, its highest point since 2021. Economists expect the Federal Reserve will start cutting interest rates as soon in its September meeting.
GBP/USD technical analysis
The GBP/USD exchange rate has been in a strong bullish trend in the past few weeks. It has remained above the ascending trendline that connects the lowest swing since November last year.
The pair has moved above the key resistance point at 1.2895, its highest swing on March 8th. It is also approaching last year’s high of 1.3132. It has also remained above the Ichimoku cloud while the Relative Strength Index (RSI) has moved above the overbought level.
The Average Directional Movement (ADX) has risen to 26, its highest level since January, meaning that the trend is strong. Therefore, the pair will likely continue rising as buyers target the next key point at 1.3130.
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