Bullish view
Buy the GBP/USD pair and set a take-profit at 1.3500.
Add a stop-loss at 1.3300.
Timeline: 1-2 days.
Bearish view
Sell the GBP/USD pair and set a take-profit at 1.3300.
Add a stop-loss at 1.3500.
The GBP/USD pair has held steady in the past few weeks, moving from a low of 1.3137 on October 14 to a high of 1.3432. It jumped after the Federal Reserve delivered its interest rate decision and after the US released some important macro numbers. This rally may continue this week as focus remains on the US midterm elections and the Bank of England (BoE) interest rate decision.
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Bank of England Decision and US Nonfarm Payroll Data
The GBP/USD pair rose after John Healey, the Chancellor of the Exchequer, announced his budget, in which he delivered some tax cuts and increases. He also adjusted his economic growth estimates, with this year’s figure coming in at 1.2%.
The pair also rose after the Federal Reserve delivered its interest rate decision. In a statement, the bank left interest rates unchanged between 3.75% and 4%, with two members voting to hike interest rates.
The bank hinted that it will deliver a rate hike this week, citing elevated inflation. A report released on Thursday showed that the headline personal consumption expenditures (PCE) rose 3.6%, remaining above the Federal Reserve’s target of 2.0%.
There will be some notable catalysts for the pair this week. First, it will react to the upcoming US midterm elections, which will determine control of the House of Representatives and the Senate.
Second, the pair will also react to the upcoming US nonfarm payrolls (NFP) data. ADP will publish the latest private payrolls data on Wednesday, while the Bureau of Labor Statistics (BLS) will release on Friday. The other macro data to watch will be the US and UK manufacturing and services PMIs.
Third, Bank of England (BoE) will deliver its interest rate decision on Thursday. Economists expect the bank to hike interest rates by 0.25%.
GBP/USD Technical Analysis
The daily chart shows that the GBP/USD pair continued rising, moving from a low of 1.3137 in October to a high 1.3432. It has jumped above the 50-day Exponential Moving Average (EMA), which is a bullish sign in technical analysis.
The pair formed a morning star candlestick pattern on October 28. This pattern leads to a bullish reversal. It has also remained above the Supertrend indicator.
The pair is attempting to move above the key resistance level of 1.3421. A move above that level will point to more gains towards the psychological level of 1.3500.
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