Bullish view
Buy the GBP/USD pair and set a take-profit at 1.3415.
Add a stop-loss at 1.3285.
Timeline: 1-2 days.
Bearish view
Sell the GBP/USD pair and set a take-profit at 1.3285.
Add a stop-loss at 1.3415.
The GBP/USD pair has pulled back in the past few days, moving from last week’s high of 1.3420 to the current 1.3342. It has retreated because of the ongoing US dollar rebound as market participants wait for the Federal Reserve interest rate decision. It has slumped by 2.45% from its highest point in September.
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Sterling Pulls Back Ahead of Fed Decision
The GBP/USD pair dropped as investors waited for the Federal Reserve interest rate decision on Wednesday. The decision comes after a series of mixed US macro data. A report earlier this month showed that the unemployment rate rose to 4.2% as the economy created just 29,000 jobs last month.
Another important report showed that the headline and core inflation remained above the Fed’s 2% target in September. US inflation will likely remain at an elevated level because of the ongoing rally in gasoline and diesel prices. The average gasoline and diesel price has jumped to $4.28 and $6.35, with the latter being at its all-time high.
These numbers mean that the Federal Reserve will decide to leave rates unchanged in this meeting as officials assess the impact of the last rate hike. Also, officials are aware that the ongoing rise in inflation is because of the ongoing US-Iran crisis, which the Fed has no control over.
The GBP/USD pair will also react to several major events this week. For example, it will react to the upcoming US macro data, including consumer confidence, house price index, and personal consumption expenditure (PCE) data. All these are important numbers that will provide more color on the state of the economy.
GBP/USD Technical Analysis
The daily chart shows that the GBP/USD pair has pulled back from a high of 1.3420 last week to the current 1.3342. This retreat is a big reversal after the pair surged from a low of 1.3135 and reached a high of 1.3419.
The pair has dropped below the 50-day moving average, while the Supertrend indicator has remained in red. This retreat seems like a mere pullback after the pair’s recent jump. As such, there is a likelihood that it will resume the upward trend. A move above this month’s high of 1.3420 will point to more gains, potentially to the psychological level of 1.3500. Ready to trade our free trading signals? We’ve made a list of the best UK forex brokers worth using.