Bullish view
Buy the GBP/USD pair and set a take-profit at 1.3600.
Add a stop-loss at 1.3350.
Timeline: 1-2 days.
Bearish view
Sell the GBP/USD pair and set a take-profit at 1.3350.
Add a stop-loss at 1.3600.
The GBP/USD pair wavered after the Federal Reserve delivered its interest rate decision and as geopolitical tensions rose. It was trading at 1.3480, a few points below this month's high of 1.3595, as focus shifted to the upcoming Bank of England (BoE) interest rate decision.
Bank of England Interest Rate Decision Ahead
The GBP/USD pair retreated, driven by several moving parts, including the Federal Reserve, which delivered its interest rate decision.
In Jerome Powell's final meeting as Fed Chair, the bank decided to leave interest rates unchanged between 3.50% and 3.75%. Officials hinted that they will continue observing the economy to determine whether to hike or cut interest rates this year.
The bank is concerned that the country’s inflation will continue rising as energy and food prices soar. Data shows that crude oil prices continued rising, with AAA showing that the average gasoline price moved to $4.15. Food prices are expected to keep rising as fertilizer costs surge.
Oil prices soared as investors reacted to the ongoing blockade of the Strait of Hormuz. In a statement, Trump said that the US will maintain its blockade and possibly launch a limited attack against Iran.
The GBP/USD pair will next react to the upcoming Bank of England (BoE) interest rate decision, which will come out later today. Economists expect the bank to leave interest rates unchanged at 3.75%.
A key challenge for the BoE and the Federal Reserve is that their economies are now in a period of stagflation, which is characterized by higher interest rates and slow economic growth.
In addition to the upcoming Bank of England decision, the US will publish the latest GDP and personal consumption expenditure (PCE) report. Economists expect the data to show that the economy expanded by 2.3% in Q1 after growing by 0.5% in Q4.
GBP/USD Technical Analysis
The daily chart shows that the GBP/USD pair has remained inside a narrow range in the past few days. It has remained inside that narrow range between the support and resistance levels at 1.3475 and 1.3595.
The pair has formed a bullish flag pattern, which is made up of a vertical line and a horizontal channel. It has moved above the 50-day Exponential Moving Average (EMA).
At the same time, the pair has formed an inverted head-and-shoulders pattern, which normally leads to a strong bullish breakout, potentially to 1.3600.