Bearish View
- Sell the GBP/USD pair and set a take-profit at 1.2650.
- Add a stop-loss at 1.2850.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 1.2745 and a take-profit at 1.12850.
- Add a stop-loss at 1.2650.
The GBP/USD exchange rate wavered on Monday morning as traders reacted to last Friday’s US jobs numbers, which showed substantial improvements. The pair was trading at 1.2740, up by over 2% from its lowest point this month.
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US Jobs and Inflation Data
The GBP/USD pair was on edge after a report by the Bureau of Labor Statistics (BLS) showed that the labor market bounced back in November. It created over 227k jobs, a big increase from the 30k that it added a month earlier.
The average hourly earnings rose by 4.0%, higher than the median estimate of 3.9%. It rose by 0.4% on a month-on-month basis. However, the participation rate slipped to 62.5%, while the unemployment rate rose from 4.1% to 4.2%.
The next key GBP/USD news to watch will come out on Wednesday when the US releases the latest consumer inflation data. Inflation is an important number that forms part of the Federal Reserve’s dual-mandate.
Economists polled by Reuters expect the data to show that the headline and core inflation retreated slightly in November.
These numbers will help the Fed when it meets next week. In recent statements, Fed officials have called for the need to embrace a gradual pace of cuts since inflation has remained stubbornly high.
GBP/USD Technical Analysis
the GBP/USD exchange rate has pulled back after topping at 1.3435 in September. It bottomed at 1.2487 and has crawled back in the past few days, reaching a high of 1.2745.
The pair is consolidating at the 50% Fibonacci Retracement level. Notably, it is about to form a death cross pattern, which happens when the 50-day and 200-day moving averages cross each other.
It is also forming a rising wedge pattern, which happens when two trendlines are converging. An asset tends to have a bearish breakout when this pattern forms.
Therefore, there are rising odds that the pair will erase some of the recent gains this week, and possibly drop to the key support at 1.2600. That retreat will be confirmed when the pair drops below the important point at 1.2668, its lowest swing on August 8.
On the flip side, a move above the key resistance at 1.2800 will invalidate the bearish view. If that happens, it may rise to the 38.2% retracement point at 1.3100.
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