Sterling Set to Cruise to 1.2300

The pair will likely keep rising as buyers target the key resistance at 1.2300.

Bullish View

• Buy the GBP/USD pair and set a take-profit at 1.2300.
• Add a stop-loss at 1.2050.
• Timeline: 1-2 days.

Bearish View

• Set a sell-stop at 1.2130 and a take-profit at 1.2050.
• Add a stop-loss at 1.2250.

The GBP/USD price made a bullish breakout as investors reflected on last week’s Federal Reserve decision and the upcoming Bank of England (BoE) meeting. The pair rose to a high of 1.2230, which was the highest point since June 28th of this year. It has risen by about 3.60% from the lowest level this year.

Fed and BoE Decisions

The GBP/USD pair moved sideways last week as investors reflected on the latest decision by the Federal Reserve. The bank decided to hike interest rates by 0.75% for the second consecutive meeting. This increase was smaller than the 1% that most analysts were expecting.

Focus now shifts to the Bank of England (BOE), which will start and complete its monetary policy meeting this week. Analysts expect that the bank will hike rates for the sixth consecutive time in a bid to fight inflation. Based on recent comments by Andrew Bailey, analysts expect that the BoE will hike rates by 0.50%.

Data published by the Office of National Statistics (ONS) revealed that the country’s consumer price index (CPI) rose to a multi-decade high of 9.4%. This makes it the biggest inflation in the G7 followed by the United States whose CPI rose by 9.1% in June.

Meanwhile, the UK labor market is still strong. The unemployment rate remained unchanged at 3.8%, which means that the labor market is still tightening. However, data revealed that the country’s retail sales recoiled in June as inflation jumped.

The GBP/USD pair will next react to the latest UK and US PMI numbers. In the UK, analysts expects that the country’s inflation dropped to 52.2 in July. In the US, economists expect that the data by the Institute of Supply Management (ISM) will show that the manufacturing PMI dropped from 53.3 to 52.2.

GBP/USD Forecast

The four-hour chart shows that the GBP/USD pair has been in a strong bullish trend in the past few weeks. It has risen by more than 3.50% from its lowest level in July. Along the way, the pair has moved above the 25-day and 50-day moving averages. It is also supported by the ascending blue trendline.

Most importantly, the pair rose above the important resistance at 1.2085, which was the neckline of the inverted head and shoulders pattern. Therefore, the pair will likely keep rising as buyers target the key resistance at 1.2300.

Ready to trade our free daily Forex trading signals? We’ve shortlisted the best Forex trading brokers in the industry for you.