Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.2700.
- Add a stop-loss at 1.2800.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.2770 and a take-profit at 1.2835.
- Add a stop-loss at 1.2700.
The GBP/USD exchange rate was in a tight range on Tuesday morning ahead of a series of important economic data from the UK and the US. The cable was trading at 1.2765, up from last week’s low of 1.2665.
UK and US inflation data
The GBP/USD may become the most volatile currency pair this week because of the upcoming US and UK economic numbers.
The Office of National Statistics (ONS) will go first on Tuesday when it publishes the country’s jobs report. Economists expect the report to show that the unemployment rate rose from 4.4% in May to 4.5% in June while the average earnings eased from 5.7% to 4.6%.
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The other key data to watch will be the country’s inflation report. Recent surveys by Bloomberg and Reuters estimate that the UK inflation rose for the first time in July. The average estimate is that the CPI rose from 2.0% in June to 2.3% in July, the first monthly increase.
These numbers will provide more information about the country’s inflation and a signal of what to expect in the next meetings. In a statement on Monday, Catherine Mann, a BoE official, said that the bank may be forced to maintain a restrictive policy for a while now that wage growth is still high.
The other key data to move the GBP/USD pair will be Tuesday’s producer price index (PPI) followed by the consumer price index (CPI) on Wednesday. In most cases, the PPI figure has a minimal impact on the US dollar.
A sign that US inflation rose slightly in July will be unlikely to change the Fed’s view about the economy and the need for rate cuts. The US will also release the important retail sales, manufacturing, and industrial production numbers on Thursday.
GBP/USD technical analysis
The GBP/USD pair formed a small double-bottom pattern around the 1.2665 level and whose neckline was at 1.2735. On the 4H chart, the pair has risen above the neckline and flipped the descending trendline that connects the highest swings since July 24.
It is consolidating at the 50-period Exponential Moving Average (EMA) and is slightly below the 61.8% Fibonacci Retracement point.
At the same time, it has formed a shooting star candlestick pattern, which is characterized by a small body and a long upper shadow. Therefore, the pair may resume the downtrend and retest the support at 1.2730. This view will be invalidated if the pair rises above the key resistance point at 1.2795.
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