The pair will likely retest the upper side of the channel and then resume the bearish trend to about 1.1700.
Set a sell limit at 1.1900 and a take-profit at 1.1760.Add a stop-loss at 1.200.Timeline: 1-2 days.
Set a buy-stop at 1.1890 and a take-profit at 1.1950.Add a stop-loss at 1.1800.
The GBP/USD pair rose slightly ahead of the upcoming important economic data from the UK. Sterling rose to a high of 1.1870, the highest level since July 14th of this year. This price is about 1% above the lowest level this month.
UK Inflation and Jobs Data Ahead
The GBP/USD pair had another tough week as the US dollar strength accelerated. The dollar index surged above $108 for the first time in over 20 years after the strong inflation data. The numbers revealed that the country’s headline inflation surged to a 40-year high of 9.1%.
Additional data from the US showed that retail sales did relatively well in June. The headline retail sales rose by 1.0% in June as furniture, e-commerce, and electronics sales jumped. A week earlier, numbers revealed that the unemployment rate remained unchanged at 3.7% as the economy added over 372k jobs.
Therefore, the dollar strengthened as investors reacted to the possibility that the Federal Reserve will continue tightening in the coming months. Analysts moved their expectation from a 0.75% rate hike to about 100 basis points.
The GBP/USD pair also declined because of the ongoing political crisis in the UK. Boris Johnson said that he will resign as the country’s Prime Minister. Analysts now predict that the next PM will be Rishi Sunak, Penny Mordaunt, or Liz Truss. The pair will react to the changing political dynamics in the country.
The air will also react to the latest economic data from the UK. The Office of National Statistics (ONS) will publish the latest UK jobs data. Analysts expect the data to show that the unemployment rate remained unchanged at 3.8% in May while the average earnings index with bonuses rose to 6.9%.
The other important data will be on UK inflation, which will come out on Wednesday. Analysts expect that inflation surged to 9.2%.
The GBP/USD pair has been crawling back in the past few days. It has risen to a high of 1.1870, which was higher than last week’s low of 1.1760. The pair has formed a descending channel that is shown in blue.
It has also moved slightly below the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved above the neutral point at 50. Therefore, the pair will likely retest the upper side of the channel and then resume the bearish trend to about 1.1700.