Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.2800.
- Add a stop-loss at 1.3000.
- Timeline: 1-2 days.
Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.3025.
- Add a stop-loss at 1.2800.
The GBP/USD pair will be in the spotlight this week as the Federal Reserve and the Bank of England (BoE) deliver their interest rate decisions. It retreated to 1.2865 on Monday morning, down from this month’s high of 1.3045.
BoE and FOMC decisions
The GBP/USD pair rose slightly on Friday after the US published June’s personal consumption expenditure (PCE) inflation report.
According to the Bureau of Economic Analysis, the headline PCE index dropped to 2.5% in June while the core PCE remained steady at 2.6%. On a MoM basis, the two figures rose slightly to 0.1% and 0.2%.
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These numbers mean that the US inflation is falling, although it remains stubbornly above the Federal Reserve target of 2.0%.
The data came ahead of the upcoming US consumer confidence data set for Tuesday and the Federal Reserve decision. Analysts expect the Fed to leave rates unchanged between 5.25% and 5.50% in this meeting.
The Fed will likely maintain its data-dependence stance and then point to a rate cut in its September rate cut. By then, the US will have published more economic data on inflation and the labor market. One of these data, the non-farm payrolls (NFP), will come out on Friday.
The next important GBP/USD news will come out on Thursday when the Bank of England (BoE) will deliver its interest rate decision. Unlike the Fed, analysts have mixed opinions on what to expect from the BoE.
With inflation falling to the bank’s target, most analysts expect the bank to cut interest rates by 0.25% to 5.0%. However, some analysts believe that the bank may decide to leave interest rates unchanged and point to a September cut.
GBP/USD technical analysis
The GBP/USD exchange rate formed a shooting star candlestick pattern on July 17, leading to a sell-off in the past few days. It retreated below the important support point at 1.2892, its highest point on March 8th.
The pair has remained above the 50-day and 25-day Exponential Moving Averages while the two lines of the MACD have formed a bearish crossover. Also, the two lines of the Stochastic Oscillator have pointed downwards.
Therefore, the pair will likely continue falling ahead of the upcoming Fed and BoE decisions. This trend could see it drop to the key support point at 1.2800.
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