The pair will likely keep rising as bulls target the key resistance level at 1.3700, which is along the 78.6% Fibonacci retracement level.
Bullish View
Bearish View
The GBP/USD rose to the highest level since November 9th as hopes of a more hawkish Bank of England (BOE) rose. The pair has jumped by more than 3% from its lowest point in December. This makes sterling the best-performing currency in the G10.
More Hawkish BOE
The Bank of England surprised the market in December when it decided to hike interest rates by 0.25% amid a surge of Omicron cases in the UK. The bank judged that fighting inflation was a bigger priority considering that consumer prices have tilted upwards in the past few months.
The strong performance of the GBP/USD is likely because analysts expect that the BOE will embrace a more aggressive rate policy this year. Besides, the UK economy is expected to remain open since the symptoms of the Omicron variants are relatively mild.
Recent data have shown that the UK economy is doing well. For example, on Tuesday, data published by Markit revealed that the country’s manufacturing PMI remained above the expansion zone of 50 in December. Later today, the company will publish the latest services PMI numbers that are expected to show that the PMI rose to 53.1 in December.
The GBP/USD pair also rose even after the strong American jobs numbers. According to ADP, the private sector added more than 800k jobs in December after adding over 500k jobs in the previous month. This increase was better than the median estimate of 400k. The data came a day after the Labor Department said that the US had over 10 million vacancies.
On Thursday, the US will publish the latest initial jobless claims numbers. Economists expect the data will show that the claims rose slightly because of the Omicron variant. The official non-farm payrolls will come out on Friday.
GBP/USD Forecast
The GBP/USD pair has been in a strong bullish trend. On the four-hour chart, it has managed to move above the 25-period and 50-period moving averages. It also moved to the 61.8% Fibonacci retracement level while oscillators like the Relative Strength Index (RSI) have continued rising. The pair is also above the Ichimoku cloud.
Therefore, the pair will likely keep rising as bulls target the key resistance level at 1.3700, which is along the 78.6% Fibonacci retracement level. This view will be invalidated if the price manages to decline below the key support at 1.3492.
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