The GBP/USD pair has seen a recent pullback after hitting a high of 1.2575, currently trading around 1.2500. This movement follows stronger-than-expected US economic data, which has fueled speculation that the Federal Reserve might maintain a hawkish stance. The upcoming release of the Fed minutes and US jobs data will likely be the key catalysts for the pair’s direction.
Trading Signals (Short-Term):
Bullish Scenario:
- Entry: Buy-stop order at 1.2550
- Target: Take-profit at 1.2625
- Stop-loss: Set at 1.2400
- Timeframe: Expect this move within 1-2 days.
Bearish Scenario:
- Entry: Sell-stop order at 1.2480
- Target: Take-profit at 1.2400
- Stop-loss: Set at 1.2600
Key Factors Influencing GBP/USD:
Strong US Data: Recent US economic reports have exceeded expectations:
- The ISM Non-Manufacturing PMI surged to 64.4 in December, significantly above the anticipated 57.5. This indicates a robust service sector, a major driver of the US economy.
- Job openings hit a six-month high of over 8 million, also surpassing forecasts, highlighting a potentially tight labor market.
- The trade deficit narrowed in November as exports saw a significant increase.
Implications for the Federal Reserve: The strong economic data suggests that the Fed may maintain a hawkish stance, keeping interest rates higher for longer to combat inflation. The upcoming Fed minutes from the last meeting will offer further insight into this.
Upcoming Events: Traders should keep a close eye on:
- Federal Reserve Minutes: To gain clarity on the Fed’s current thinking on monetary policy.
- US Non-Farm Payrolls (NFP): To assess the health of the US labor market.
Technical Analysis:
Recent Price Action: The GBP/USD pair saw a recent rally to 1.2575, before reversing downwards to around 1.2500.
Key Technical Levels:
- Resistance: The pair has moved below the initial resistance at the Woodie Pivot Point level of 1.2550 and has also fallen below 23.6% Fibonacci retracement levels.
- Support: The next key support area is around 1.2400, with potential for a move to 1.2600 if price action breaks above 1.2550.
Momentum: The Stochastic Oscillator on the 4-hour chart is showing a loss of upward momentum as it has dipped from overbought conditions.
Trend: The pair has also broken below a descending trendline from mid-December.
Conclusion & Outlook:
The GBP/USD pair is likely to remain range-bound with potential volatility ahead of the Fed minutes and jobs data. Traders should watch 1.2400 as a key support and 1.2600 as potential resistance. A move above 1.2550 could trigger a move toward 1.2600.
Key Takeaways:
- Keep a close eye on economic releases, especially the US Fed minutes and NFP numbers.
- Be prepared for potential volatility.
- Use the suggested trading signals for short-term opportunities.
- Manage risk carefully with appropriate stop-loss orders.
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