Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.2535.
- Add a stop-loss at 1.2800.
- Timeline: 1-2 days.
Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.2800.
- Add a stop-loss at 1.2535.
The GBP/USD exchange rate continued its upward trajectory this week, reaching a high of 1.2685, its highest level since December 18. It has rebounded by almost 5% from its lowest level this year.
The GBP/USD pair has risen mostly because of the ongoing performance of the US dollar, which has pulled back from the year-to-date high of $110 to $106 as some geopolitical risks eased as others rose. For example, the US is talking with Russia on how to end the war in Ukraine, while Israel is in a ceasefire with Hamas.
The biggest macro risk this year has been Donald Trump, who has insisted that the US will move on with its tariff proposals in March. He wants to impose a 25% tariff on imported goods from Canada and Mexico, a move that will invalidate the USMCA deal he signed into law in his first term since the two countries will respond by issuing tariffs of their own.
There will be no major economic data from the United Kingdom on Thursday. The most notable economic numbers will come out from the US, which will publish the latest GDP and initial jobless claims data. Economists expect the data to show that the economy expanded by 2.3% in the final quarter of last year.
While the US GDP data is an important report, it will have no major impact on the pair because it is the second estimate and the market already knows what to expect.
The report will also not change the view of the Federal Reserve, which has hinted that it will maintain higher interest rates for longer because of the rising inflation in the country.
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GBP/USD technical analysis
The GBP/USD exchange rate has continued its strong uptrend this month and moved to the highest level since December 18. It jumped above the 50-day moving average and the Ichimoku cloud indicator.
The pair’s oscillators have continued rising, a sign that it has a bullish momentum. However, it has also formed a rising wedge pattern, comprising two ascending and converging trendlines.
Therefore, with the two lines nearing their confluence, there is a risk that it will have a bearish reversal in the coming days. If this happens, the next level to watch will be at 1.2530, the 50-day moving average.
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