The pair will likely keep rising as bulls target the 50% Fibonacci retracement level at 1.3372.
Buy the GBP/USD pair and set a take-profit at 1.3372.Add a stop-loss at 1.3170.Timeline: 1-2 days.
Set a sell-stop at 1.3160 and a take-profit at 1.3100.Add a stop-loss at 1.3250.
The GBP/USD pair jumped to the highest point since March 4th as the US dollar retreated ahead of the upcoming UK consumer inflation data. The pair is trading at 1.3250, which is about 1.95% above the lowest level this year.
UK Inflation Data
The Bank of England (BOE) concluded its two-day meeting last week and sounded increasingly hawkish in a bid to contain the rising inflation. The bank decided to hike interest rates by another 0.25%, pushing its main rate to 0.75%.
Still, the bank is in a difficult situation considering that inflation is rising even after its previous rate hikes. That’s because the ongoing crisis in Ukraine has led to a sharp jump of most commodity prices. Wheat has risen to an all-time high while oil prices are trading at a decade high.
Therefore, the bank is in a tough situation because more rate hikes could interfere with the country’s economic growth by slowing lending dramatically.
The GBP/USD pair will react to the latest consumer inflation data scheduled for Wednesday. Analysts expect data by the Office of National Statistics (ONS) to show that the headline consumer inflation jumped to 5.9% in February. Core CPI, which excludes the volatile food and energy prices, is expected to have increased from 4.4% to 5.0%.
Producer prices are also expected to remain at elevated levels because of the rising commodity prices and part shortages. For example, the PPI input is expected to rise from 13.6% to 13.9% while PPI output rose from 9.9% to 10.1%.
The other catalyst for the GBP/USD will be the latest statement by the BOE and FOMC governors. Andrew Bailey’s remarks will be the first ones since the bank decided to hike interest rates.
The four-hour chart shows that the GBP/USD pair continued its bullish trend in the overnight session. It managed to move above the 23.6% Fibonacci retracement level. It also rose above the 25-day and 50-day moving averages.
Further, the pair has formed an inverted head and shoulders pattern, which is usually a bullish sign. The MACD has also moved above the neutral level. Therefore, the pair will likely keep rising as bulls target the 50% Fibonacci retracement level at 1.3372.