A possible reason for the dollar weakness is the upcoming American mid-term elections scheduled for Tuesday. T
Buy the GBP/USD pair and set a take-profit at 1.1650.Set a stop-loss at 1.1585.Timeline: 1-2 days.
Set a sell-stop at 1.1460 and a take-profit at 1.1380.Add a stop-loss at 1.1550.
The GBP/USD price continued rallying on Tuesday morning as the US dollar continued retreating. It rallied to 1.1536, the highest point since November 2. The Sterling has jumped by over 5% from its lowest level this year.
US dollar retreats
The GBP/USD pair rose even after the UK published weak housing data on Monday. According to Halifax, house prices plunged by 0.4% in October, the lowest level since February 2021. Prices rose by 8.3% on a year-on-year basis, down from the previous increase of 9.8%.
UK home prices have been in a strong bearish trend in the past few months because of the extremely hawkish Bank of England. Last week, the BoE decided to hike interest rates by 0.75% in a bid to fight soaring inflation. The BoE pointed to a slower pace of rate hikes in the coming meeting.
The GBP/USD price rose because of the weak US dollar. The DXY index, which tracks the US dollar against a basket of currencies, declined to $110, down from the year-to-date high of $115.
A possible reason for the dollar weakness is the upcoming American mid-term elections scheduled for Tuesday. These are important elections because they will change the balance of power in Washington. Polls signal that Republicans will win at least one chamber. As such, this will make it almost impossible for Biden to pass his agenda for the remaining of the term.
The next important catalyst for the pair will be the upcoming American inflation data scheduled for Thursday. Economists expect the numbers to show that the headline and core inflation remained at an elevated level.
This week’s inflation data will be important because of last week’s Fed decision. In its meeting, the Fed hiked rates by 0.75% and signaled that it will be data-dependent on future hikes.
The GBP/USD pair has been in a strong bullish trend for the past two straight days. On Monday, the pair managed to cross the important resistance level at 1.1492, the highest point on October 14. It managed to move above the standard pivot point.
The pair also rose above the 50-day exponential moving average while the Stochastic Oscillator is rising. This upside has some more room to run as buyers target the next key resistance point at 1.1650. The stop-loss of this trade is at 1.1400.