The GBP/USD price surged even after data showed that the UK sunk into a recession amid rising risks.
Buy the GBP/USD pair and set a take-profit at 1.1935.Add a stop-loss at 1.1650.Timeline: 1-2 days.
Set a sell-stop at 1.1717 and a take-profit at 1.1590.Add a stop-loss at 1.1850.
The GBP/USD price continued its bullish trend even after worrying economic data from the UK. It jumped to a high of 1.1850, the highest point since August this year. The pair has risen by more than 13% from its lowest level this year.
US dollar retreats
The GBP/USD pair has made a strong recovery as the US dollar pulled back. After soaring to a multi-decade high of $115 in September, the US dollar index has pulled back to about $106. This decline accelerated after the US published the latest consumer inflation data.
According to the Bureau of Labor Statistics (BLS), the headline consumer price index (CPI) dropped from 8.3% in September to 7.7% in October. That was a bigger decrease than what most analysts were expecting. Core inflation declined to 6.3% during the month.
Therefore, the pair surged as investors predicted that the Fed will start slowing down on its rate hikes in the coming months. The bank has already hiked rates by 400 basis points this year. With inflation easing, analysts now expect that the Fed will hike by 0.50%.
The GBP/USD price surged even after data showed that the UK sunk into a recession amid rising risks. According to the Office of National Statistics (ONS), the British economy contracted by 0.2% in Q3 after expanding by 0.2% in Q2. On a year-on-year basis, the economy expanded by 2.4%, which was higher than the median estimate of 2.1%.
The pair rose because the figures were better than what most analysts were expecting. The next key catalyst for the pair will be the upcoming UK jobs numbers scheduled for Tuesday and inflation data set for Wednesday. Economists expect the data to show that UK’s inflation surged from 10.1% in September to 10.6% in October.
The four-hour chart shows that the GBP/USD price has been in a strong bullish trend in the past few weeks. It managed to move above the important resistance level at 1.1647, which was the highest level in October. It was also the upper side of the ascending triangle pattern.
The pair is being supported by the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved to the overbought level. Therefore, the pair will likely continue rising as buyers target the next key resistance level at 1.1950.