Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.3425.
- Add a stop-loss at 1.3100.
- Timeline: 1-2 days.
Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.3100.
- Add a stop-loss at 1.3425.
The GBP/USD exchange rate continued its strong rally, reaching its highest level since October last year. It has risen in the past seven straight days, and is up by almost 10% from its lowest level this year.
UK inflation and Jerome Powell statement
The GBP/USD pair has been in a strong rally as the US dollar continued rising. This trend continued after the UK published softer inflation data that raised the optimism that the Bank of England will cut interest rates soon.
The report showed that the headline consumer inflation dropped from 0.4% in February to 0.3% in March. This translated to a decline from 2.8% to 2.6% on a year-on-year basis.
The closely-watched core inflation figure dropped from 3.5% to 3.4% during the month. Therefore, there is optimism that the Bank of England will restart its interest rate cuts in the next few meetings.
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The GBP/USD pair also soared afte the US released strong retail sales data. According to the Commerce Department, retail sales rose from 0.2% in February to 1.4% in March, leading to an annualized increase of 4.6%.
The pair will have no major economic catalysts on Thursday. The top data to watch will come from the US, which will release the latest housing starts and building permits numbers.
Housing starts are expected to have increased from 1.42 million to 1.5 million, while building permits will move from 1.4 million to 1.59 million. While these numbers are important, their impact on the US dollar index will be minimal.
GBP/USD technical analysi
The GBP/USD pair has been in a strong bull run in a strong rally this month as the US dollar index continued its strong rally. It moved above the ultimate resistance of the Murrey Math Lines tool.
The pair has also moved to the upper side of the ascending channel and the 50-day moving average. Also, the Average Directional Index (ADX) has jumped to 30, a sign that the trend is strengthening. The Relative Strength Index has also continued rising.
Therefore, the pair is likely to drop and potentially retest the psychological point at 1.3100 and then resume the uptrend. The alternative scenario is where it rises to the key resistance level at 1.3425, its highest level in September last year.
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