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GBP/USD Forex Signal: More Upside as US Dollar Retreats – 24 May 2022

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The pair will likely keep rising as bulls the key resistance at 1.2670.

Bullish View

Buy the GBP/USD pair and set a take-profit at 1.2700.Add a stop-loss at 1.2496.Timeline” 1-2 days.

Bearish View

Set a sell-stop at 1.2525 and a take-profit at 1.2450.Add a stop-loss at 1.2625.

The GBP/USD pair gathered momentum during the Asian session as the US dollar index retreated and as investors reacted to mixed UK data. It is trading at 1.2570, which was the highest level since May 5th. It has risen by more than 3.45% from its lowest level this year.

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Weaker US Dollar

After soaring to the highest level in almost two decades, the US dollar index has retreated slightly in the past few days. The decline has happened even after the hawkish statement by Jerome Powell, the head of the Federal Reserve.

In his statement last week, Powell reiterated that the bank will continue hiking interest rates and warned that there would be some pain. Therefore, the weakening US dollar has contributed to the price action of the GBP/USD pair.

The GBP/USD pair has also held steady after the mixed economic numbers that were published last week. The data revealed that the unemployment rate crashed to the lowest level in decades. The labor market has tightened substantially as the number of vacancies has risen.

Further data showed that the country’s inflation is still surging. It rose to 9% in April this year as the cost of energy remained at elevated levels. At the same time, the soaring inflation has not slowed retail sales. On Friday, data by the Office of National Statistics showed that retail sales rose sharply in April helped by cigarettes and alcohol.

Therefore, the GBP/USD pair has risen sharply as investors’ price in more tightening by the Bank of England (BOE). In a statement, the BOE chief economist warned that it will continue tightening in the coming months.

The next key catalysts for the GBP/USD pair will be the upcoming flash manufacturing and services PMI data from the US and UK. A statement by Jerome Powell will also lead to some market action.

GBP/USD Forecast

The GBP/USD pair has been in a strong bullish trend in the past few days. Along the way, the pair has moved above the important resistance level at 1.2496, which was the highest level on May 18th. This price was also along the neckline of the inverted head and shoulders pattern.

Further, the pair has moved slightly above the 25-day and 50-day moving averages while the Stochastic Oscillator has moved above the overbought level. Therefore, the pair will likely keep rising as bulls the key resistance at 1.2670.

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