Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.3430.
- Add a stop-loss at 1.3200.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.3280 and a take-profit at 1.3200,
- Add a stop-loss at 1.3430.
The GBP/USD pair remained in a tight range after Donald Trump announced a trade deal between the US and the United Kingdom. It was trading at 1.3300, a few points below the resistance level at 1.3445, the upper side of the cup and handle pattern.
Key US and UK economic data ahead
The GBP/USD pair moved sideways after Trump announced a deal with the UK. This deal will remove some of the tariffs he placed on UK goods like automobiles, steel, and aluminium. In return, the US secured concessions that will provide more access to US industries like agriculture and lower digital tax.
The next important GBP/USD news will be the upcoming US inflation data scheduled on Wednesday. Economists expect these numbers to show that inflation started rising in April because of tariffs.
They, nonetheless, expect the impact of these tariffs to take time to reflect on the data as companies are still working with the inventory they accumulated before the tariffs came in place. Goldman Sachs analysts expect that inflation will end the year at 3.8%, while some analysts see it rising to over 4%.
The hope among analysts is that the US will reach an agreement with China and its other trading partners, like Canada and Mexico. The other key US data will come out on Thursday when it publishes the latest retail sales and manufacturing production data.
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These numbers will come a week after the Federal Reserve delivered its interest rate decision. It left interest rates unchanged and hinted that it will embrace a wait-and-see approach.
The GBP/USD pair will also react to the upcoming UK labor market data on Tuesday, and GDP numbers on Thursday. Economists expect these numbers to reveal that its economy expanded by 0.1% in March after growing by 0.5% in the previous month.
GBP/USD technical analysis
The daily chart shows that the GBP/USD pair continued consolidating even after the UK and US trade deal. It was trading at 1.3300 on Monday, a few pips above the lowest point this month.
The pair’s consolidation is part of the formation of the handle section of the cup-and-handle section, one of the most bullish continuation signs. It is also forming a bullish pennant pattern.
Therefore, the pair will likely have a bullish breakout, with the next point to watch being the upper side of the cup at 1.3428.
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