There is a likelihood that the pair will continue rising ahead of the BOE decision scheduled for Thursday.
Bullish View
- Buy the GBP/USD pair and set a take-profit at 1.3610.
- Add a stop-loss at 1.3450.
- Timeline: 1-2 days.
Bearish View
- Set a sell-stop at 1.3480 and a take-profit at 1.3400.
- Add a stop-loss at 1.3550.
The GBP/USD held steady on Wednesday morning as investors reflected on the strong economic data from the UK and US. The pair rose to a high of 1.3510, which was the highest level since January 27th. It has risen by more than 1.10% from its lowest level last week.
UK Economic Data
The UK economy is doing relatively well even as the political climate worsens. Data published on Tuesday showed that the country’s home prices continued rallying in January. According to the Nationwide Society, the UK home price index (HPI) made the best start of the year in 17 years.
Precisely, home prices rose by 11.2% in January after rising by 10.4% in December last year. This strong growth is mostly because of the relatively low mortgage rates. Other factors that have contributed is the rising demand and low inventories. Most importantly, the cost of building new homes has been on an upward trend.
Further data published by the Bank of England revealed that mortgage approvals jumped to 71.02k in January after rising by 67k in the previous month. In total, banks provided mortgages worth more than 3.57 billion pounds during the month.
Meanwhile, according to Markit, the manufacturing sector also did well in January. The manufacturing PMI rose to 57.3, which was better than the median estimate of 56.9.
Therefore, the GBP/USD pair rose because of the upcoming interest rate decision by the Bank of England. Analysts expect that the bank will hike interest rates by another 25 basis points tomorrow.
The next key catalyst for the pair will be the ADP estimate of US private sector payroll numbers. Analysts expect the data to show that the economy added over 201k jobs in January. On Tuesday, data by the government showed that there were more than 10 million vacancies.
GBP/USD Forecast
On the four-hour chart, we see that the GBP/USD pair has been in a strong bullish trend in the past few days. The pair has managed to move slightly below the 38.2% Fibonacci retracement level. It has also jumped slightly above the 25-day and 50-day exponential moving averages (EMA). the pair is also approaching the first support of the Andrews Pitchfork tool.
Therefore, there is a likelihood that the pair will continue rising ahead of the BOE decision scheduled for Thursday. If it happens, the next key level to watch will be at 1.3610.
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