The GBP/USD pair has been in a strong downward trend in the past few months.
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- Sell the GBP/USD pair and set a take-profit at 1.2350.
- Add a stop-loss at 1.2550.
- Timeline: 1-2 days.
- Set a buy-stop at 1.2520 and a take-profit at 1.2620.
- Add a stop-loss at 1.2420.
The GBP/USD pair was flat on Wednesday morning ahead of the latest economic data from the UK and the US. The pair was trading at 1.2493, a few points above this week’s low of 1.2442.
The GBP/USD exchange rate remained unchanged after the mixed UK jobs data. According to the Office of National Statistics(ONS), the country’s unemployment rate rose slightly from 4.2% in June to 4.3% in July.
The economy lost over 207k jobs in the three months to July, a bigger increase than the median estimate of 185k. Most importantly, data showed that the average earnings index with bonus rose from 8.4% to 8.5%.
These numbers mean that the Bank of England (BoE) will find it difficult to bring inflation to its target of 2.0%. Worsening the situation is the fact that the price of crude oil has jumped sharply in the past few days. Petrol price has risen to over 154 pence, higher than where it was a few weeks ago.
The next important data to watch will be the upcoming UK GDP data. Economists polled by Reuters expect the numbers to reveal that the economy contracted by 0.2% in July after growing by 0.5% in June. This slowdown will translate to a year-on-year growth of 0.4%.
The other important data the ONS will publish will be the latest industrial and manufacturing production and trade numbers.
The GBP/USD pair will also react to the latest US inflation numbers, which will help to set the tone for next week’s monetary policy meeting. Economists expect the data to show that the headline inflation rose to 3.4% on a YoY basis while core inflation retreated slightly to 4.3%.
The GBP/USD pair has been in a strong downward trend in the past few months. It has dropped below the descending channel and moved below the 50-period moving average. Its attempts to bounce back found a strong resistance at 1.2550.
The pair has moved slightly below the Woodie pivot point while the Relative Strength Index (RSI) is a few points lower than the neutral point. Therefore, the pair will likely continue falling as sellers target the key support at 1.2350.