The pair will likely keep rising, with the next main resistance level being at 1.2640.
Buy the GBP/USD pair and set a take-profit at 1.2640.Add a stop-loss at 1.2450.Timeline: 1-2 days.
Set a sell-stop at 1.2496 and a take-profit at 1.2400.Add a stop-loss at 1.2550.
The GBP/USD pair held steady as the US dollar continued its bearish momentum. The pair is trading at 1.2530, which is about 3% above the lowest level this year. This price action mirrors that of the EUR/USD and the AUD/USD pairs.
Slowing Economic Growth
A picture is emerging in the UK and the US that the economic growth is starting to slow. On Tuesday, data by S&P showed that services and manufacturing output declined this month as the cost of doing business rose and as the Chinese lockdowns continued.
In the UK, the manufacturing PMI declined to 54.6 while the services PMI fell to 51.8. The same trend happened in the US, where the two inched downwards to 57.5 and 53.5, respectively.
Other numbers have painted a picture in which these economies are falling. For example, with mortgage rates rising in the US, data showed that new home sales declined to the weakest level since the pandemic started. They declined by 591k units in April from the previous 750k. Economists expect this trend to continue for a while.
Meanwhile, energy costs in the UK are expected to keep growing. According to Ofgem, the energy price cap will rise to 2,800 pounds in October from the current 1,971 pounds. This will be the biggest jump in energy prices since 1970s.
As such, there is a likelihood that the country’s inflation will keep rising in the coming months. Data published by the ONS showed that the UK inflation rose to 9% in April, the highest point in decades.
The GBP/US will react to the upcoming US durable goods order numbers that will come out in the afternoon session. The Fed will also publish the latest minutes, which will shed a light on the deliberations by officials.
The GBP/USD pair formed a break and retest pattern in the overnight session. The pair did this by retesting the important support level at 1.2496, which was the highest level on May 18th. The pair has remained above the 25-day and 50-day moving averages.
It has also moved slightly below the 38.2% Fibonacci retracement level. Also, the uptrend is being supported by the ascending trendline shown in black. Therefore, the pair will likely keep rising, with the next main resistance level being at 1.2640.