Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.3800.
- Add a stop-loss at 1.3600.
- Timeline:1-2 days.
Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.3600.
- Add a stop-loss at 1.3800.
The GBP/USD pair rose for two consecutive days after hitting the 50-day Exponential Moving Average as the US dollar slipped. It rose to a high of 1.3695, up sharply from this month's low of 1.3510.
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US Dollar Retreat Continues
The GBP/USD pair continued rising as the US Dollar Index crash continued, moving to a low of $97, its lowest level since January 30. The greenback retreated against most currencies, such as the euro, Australian dollar, and the Swiss franc.
This rebound happened even as risks to the UK government continued rising. There are signs that Keir Starmer will resign for appointing Peter Mandelson, the former ambassador to the United States. Most people in the UK believe that Starmer should resign, considering that his approval rate remains low.
The GBP/USD pair will lead to the upcoming US retail sales, jobs, and consumer inflation, which will come out on Tuesday, Wednesday, and Friday, respectively.
Economists expect the upcoming data to show that the labor market remained on edge in January, with the unemployment rate remaining at 4.4%. Another report scheduled for later this week will show that the headline and core inflation continued falling in January.
The UK government will publish the latest GDP data on Thursday. Economists expect the upcoming data to show that the economy expanded by 0.2% in the fourth quarter after growing by 0.1% in the previous quarter.
These numbers come a week after the Bank of England (BoE) delivered its interest rate decision. The bank left interest rates unchanged, with Governor Andrew Bailey predicting that it may cut rates in March.
GBP/USD Technical Analysis
The daily timeframe chart shows that the GBP/USD pair has retreated in the past few days, moving from a high of 1.3876 to a low of 1.3500. It settled at the 50-day Exponential Moving Average.
The Relative Strength Index (RSI) and the two lines of the Stochastic Oscillator have pointed upwards. It is also nearing the crucial resistance level at 1.3727.
Therefore, the most likely scenario is where the pair continues rising as bulls target the next key resistance level at 1.3875, its highest level this year. A drop below the key support level at 1.3500 will invalidate the bullish outlook.