Bullish Strategy: Buy GBP/USD, target 1.2600, stop-loss at 1.2375.
Bearish Strategy: Sell GBP/USD, target 1.2400, stop-loss at 1.2600.
Timeframe: 1-2 days.
The GBP/USD pair experienced a modest increase amid easing global trade concerns and anticipation surrounding the forthcoming Bank of England (BoE) rate decision. It reached 1.2500, a 3% rise from its recent low.
GBP/USD’s upward momentum coincided with diminished trade war anxieties, spurred by deals inked by Donald Trump with Canada and Mexico, focused on broader trade negotiations and addressing migration/fentanyl issues. Markets anticipate a positive resolution in the near term.
Furthermore, weaker-than-expected US economic data contributed to GBP/USD’s appreciation. US job openings declined significantly from 8.15M in November to 7.6M in December, falling short of the 8.01M expectation, according to the BLS.
Attention now shifts to ADP’s private payroll data and Friday’s official NFP report. Forecasts predict a 148k increase in January ADP payrolls, up from 122k previously.
These employment figures are crucial for the Federal Reserve as it weighs future monetary policy. The Fed previously held rates steady at 4.5%, signaling a potentially prolonged hawkish stance.
The upcoming BoE decision will be pivotal for GBP/USD. Analysts anticipate a 0.25% rate cut, initiating a dovish shift due to the UK’s slowing economy.
Technical Analysis:
GBP/USD has rebounded strongly, surging from 1.2090 to 1.2500, forming an inverse head and shoulders pattern – a bullish signal.
The pair has surpassed the 23.6% Fibonacci retracement level at 1.2408 but remains below the 50-day EMA and Ichimoku cloud, suggesting lingering bearish influence.
Consequently, GBP/USD is likely to continue its upward trajectory, targeting the 38.2% Fibonacci retracement level at 1.2600.
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