Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.3010.
- Add a stop-loss at 1.3300.
- Timeline: 1-2 days.
Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.3300.
- Add a stop-loss at 1.3010.
The GBP/USD exchange rate was flat on Tuesday morning as investors waited for the upcoming UK consumer and producer inflation numbers. It was trading at 1.3160, down by over 4% from its highest level in September.
UK Consumer and Producer Inflation Data Ahead
The GBP/USD pair was flat on Tuesday morning as traders waited for the latest UK inflation and the upcoming budget reading by Chancellor Rachel Reeves.
Economists expect the upcoming data to show that the headline Consumer Price Index (CPI) slipped from 3.8% in September to 3.6% in October, while core CPI moved from 3.5% to 3.4%.
The closely-watched Retail Price Index (RPI) is expected to come in at 4.3%, down from the previous 4.5%. These numbers mean that the headline inflation has remained above the Bank of England's target of 2.0, a move that may make it difficult for the Bank of England (BoE) to cut interest rates in the next meeting.
The other key catalyst for the GBP/USD pair will be the upcoming budget speech by Rachel Reeves, the Chancellor of the Exchequer. While this speech will come out next week, some leaks could influence the sterling. For example, a leak reported last week showed that Reeves may avoid increasing income tax as analysts were expecting.
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The other important GBP/USD news we will come out on Wednesday when the Federal Reserve publishes minutes of the last meeting. These minutes will provide more information on what Fed members discussed in the last meeting when they decided to deliver the second interest rate cut for the second time this year.
The FOMC minutes come at a time when some Federal Reserve officials are warning on the dangers of aggressive interest rate cuts now that inflation has remained above the 2% target for over four years. These fears have continued, with the odds of a Fed cut in December falling to below 50%.
The GBP/USD exchange rate will also react to the upcoming US jobs numbers, which will come out on Thursday.
GBP/USD Technical Analysis
The daily timeframe chart shows that the GBP/USD exchange rate has come under pressure in the past few months and is now trading at 1.3165. This price is notable because it coincided with the 38.2% Fibonacci Retracement level.
It also coincided with the lowest level in August this year, the neckline of the double-top pattern at 1.3718. Sterling is also below the 50-day Exponential Moving Average (EMA).
Therefore, the pair will likely resume the downward trend and possibly retest the key support at 1.3010, its lowest level in November. A move above the resistance at 1.3300 will invalidate the bearish outlook.
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