Sterling Outlook Ahead of UK House Data

GBP/USD remaining in a tight range.

Bullish view

• Buy the GBP/USD pair and set a take-profit at 1.2670.
• Add a stop-loss at 1.2520.
• Timeline: 1-2 days.

Bearish view

• Set a sell-stop at 1.2535 and a take-profit at 1.2490.
• Add a stop-loss at 1.2600.

The GBP/USD pair remained in a consolidation phase as investors reacted to the political situation in the UK. Sterling is trading at 1.2587, which was higher than this week’s low of 1.2437. It is about 3.50% above the lowest level in May.

Advertisement

Sterling continues its consolidation

The GBP/USD pair remained in a tight range on Tuesday as the UK parliament failed to impeach Boris Johnson. Tory members lacked the required 180 votes needed to impeach him.

This means that he will not face another impeachment in the next 12 months. In a statement, Johnson vowed to continue serving as the prime minister and implementing his plans. The pair showed no major movements because the vote was in line with what analysts were expecting.

The pair will likely remain in this range on Wednesday because there is no major scheduled economic event. The only important data to watch will be the UK house price estimate by Halifax. Based on the previous estimate by Nationwide, analysts believe that prices started to stabilize in May as mortgage rates rose.

The GBP/USD is also moving sideways as US bond yields retreat. The yield of the 10-year declined to 2.977% while that of the 30-year fell by 1.85% to 3.13%. The spread between the 10 and 2-year bond yields remained unchanged.

This price action is likely because investors are waiting for the upcoming American inflation data. The expectation is that the country’s inflation remained close to its 40-year high although it started to peak.

One sign of this is that some retailers will be forced to lower prices because of their high inventories. On Tuesday, Target said that it will start lowering some prices in the coming weeks because it over-purchased products to boost its readiness.

GBP/USD forecast

The four-hour chart shows that the GBP/USD pair has been in a tight range in the past few days. It managed to move to a high of 1.2590, which was slightly above this week’s low of 1.2438. It has also crossed the 25-day and 50-day moving averages and is approaching the important resistance level at 1.2666.

The Money Flow Index (MFI) has moved close to the neutral level of 50. Therefore, the pair will likely keep rising as bulls target the key resistance level at 1.2670.