Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.2890.
- Add a stop-loss at 1.2750.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.2785 and a take-profit at 1.2700.
- Add a stop-loss at 1.2850.
The GBP/USD pair pulled back sharply on Monday, erasing some of the gains it has made in the past few months. The pair retreated to a low of 1.2800, much lower than this month’s high of 1.2893.
US inflation and UK data ahead
The GBP/USD pair has been in a strong uptrend in the past few months, helping sterling become one of the best-performing currencies this year.
This jump happened as the UK economy did modestly better than expected. As a result, most analysts expect that the Bank of England (BoE) will be among the last central banks to start cutting interest rates.
The UK will publish two important reports this week. It will release the latest jobs numbers on Tuesday morning. Economists expect the report to show that the unemployment rate remained at 3.8% in January.
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Most importantly, they expect that the average earnings with and without bonuses continued rising in January. With bonuses, the figure is expected to come in at 5.7% while without bonuses, it is expected to be 6.2%.
UK wages have been quite strong and they now remain above the country’s inflation. The country will next release the latest GDP report on Wednesday. That report will show that the economy expanded by 0.2% in January after contracting by 0.5% in the previous month.
The other important GBP/USD news will come later on Tuesday when the US will publish the latest inflation report. Economists expect the report to show that the headline CPI dropped from 3.9% in January to 3.7% in February. They also expect that the core CPI will drop from 3.9% to 3.7%.
These numbers will come a few days after Jay Powell, the head of the Federal Reserve hinted that the bank will start cutting rates in June.
GBP/USD technical analysis
The GBP/USD pair has pulled back sharply in the past two days. It has moved below the Woodie pivot point at 1.2815 and is approaching the important support at 1.2785, its highest point on January 15th.
The Relative Strength Index (RSI) and Klinger Oscillator have pointed downwards. Therefore, the outlook for the pair is still bullish ahead of the US inflation data. It will likely retest the support at 1.2785 and then resume the upward trend. If this happens, the pair will likely retest last Friday’s high of 1.2893.
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