Bearish View
- Sell the GBP/USD pair and set a take-profit at 1.3550.
- Add a stop-loss at 1.3625.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 1.3650 and a take-profit at 1.3725.
- Add a stop-loss at 1.3600.
The GBP/USD pair drifted upwards after the latest UK inflation data and after the government announced plans to ease Covid restrictions. The pair is trading at 1.3628, which is about 0.45% above the lowest level this week.
UK Reopening
The UK entered Plan B measures in November as the number of Covid-19 cases rose. Now, Boris Johnson, the embattled Prime Minister, has laid out plans to reopen the country. In a statement, he said that the country will end these restrictions on January 27th in a move that was supported by most businesses.
The end of Plan B measures means that the government will stop asking people to work from home. It will also not require people to wear masks in public. The announcement came at a time when the number of new cases has started to fall. Over 3.4 million people were infected with Covid-19 last week. That was a lower number than the previous week’s 4.3 million cases.
The GBP/USD also tilted higher after a stream of positive data from the UK. On Tuesday, data by the Office of National Statistics (ONS) showed that the country’s unemployment rate declined from 4.2% in October to 4.1% in November. The economy has added thousands of jobs while the number of claimants has fallen.
On Wednesday, the UK published the latest consumer inflation data. The numbers revealed that the country’s headline CPI rose from 5.1% in November to 5.4% in December. Core inflation, which excludes the volatile food and energy prices, rose from 4.0% to 4.2% in December. These numbers were better than what most analysts were expecting.
The GBP/USD pair rose ahead of the important Philadelpia Fed manufacturing index data that will come out later today. Other key numbers to watch today will be the US initial jobless claims data and existing home sales numbers.
GBP/USD Forecast
The four-hour chart shows that the GBP/USD pair declined sharply on Tuesday as the US and UK bond yields jumped. As it dropped, it managed to move below the ascending trend line shown in black. Now, the pair has bounced back and moved slightly above this trend line. It has also moved to the 25-day and 50-day moving averages.
Therefore, the pair will likely pull back today ahead of the US data. This means that it will likely retest the support at 1.3550.
