The pair will likely continue rising as bulls target the key resistance level at 1.2750.
Bullish View
- Buy the GBP/USD pair and set a buy-stop at 1.2750.
- Add a stop-loss at 1.2600.
- Timeline: 1-2 days.
Bearish View
- Sell the GBP/USD and set a take-profit at 1.2550.
- Add a stop-loss at 1.2700.
The GBP/USD pair continued its bullish trend as it rose to the highest point since April 26th. The pair is trading at 1.2655, which is about 4.13% above the lowest level this month.
US Dollar Retreat
The GBP/USD pair has been in a strong bullish trend in the past few days thanks to the overall weak US dollar. After rising to the highest point in almost 20 years, the US dollar has had a major pullback in the past few days. The closely watched dollar index has dropped by more than 4% from its highest point this year.
The dollar rallied even after the hawkish statement by Christopher Waller who said that he was in support of an extremely aggressive policy that pushes interest rates above the neutral level by December. The goal of such policy measure will be to dramatically slow the economy and bring inflation at 2.0%.
The next key catalyst for the GBP/USD pair will be the upcoming US consumer confidence data that will come out in the American session. Data by Conference Board is expected to show that consumer confidence continued to drop in May as worries about inflation continued.
Confidence among consumers is an important part of the American economy because consumer spending is the biggest part of the economy. These numbers will come a few days ahead of the upcoming US jobs data.
The other key data to watch will be on the UK mortgage and borrowing data. Economists expect these numbers to show that the number of mortgage approvals declined from 70.69k in March to 69.0k in April. This decline is likely because of the rising mortgage rates in the country. Still, the impact of these numbers on the GBP/USD pair will be a bit muted.
GBP/USD Forecast
The four-hour chart shows that the GBP/USD pair has been in a strong bullish trend in the past few days. Along the way, the pair has managed to move above the important resistance level at 1.2636, which was the highest level on May 5th. The pair has continued moving above the important 25-day and 50-day moving averages while the Relative Strength Index is slightly below the overbought level.
Therefore, the pair will likely continue rising as bulls target the key resistance level at 1.2750. A drop below the support at 1.2600 will invalidate the bullish view.
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