GBP / USD Forex Signal: Bullish Rebound Likely
It is possible that the pair will rebound as buyers target the channel high at around 1.3850.
GBP / USD was little changed as investors reacted to the rise in the price of crude oil and the upcoming US consumer confidence and UK fall budget. The pair is trading at 1.3778, about 0.40% below the week’s high.
U.S. Consumer Confidence Data
The price of crude oil continued its uptrend during the overnight session. Brent, the global benchmark, hit $ 85 while West Texas Intermediate (WTI) peaked over $ 84 in seven years. This came as investors remained optimistic that demand would continue to rise. The price of gasoline has also jumped by more than 10%.
Therefore, the implication of this is that inflation in the US and UK will continue to rise. In a statement released on Friday, the new chief economist at the Bank of England (BOE) said inflation would likely hit 5% in the coming months. He then predicted that the BOE would start deliberating on a tightening in future meetings.
Meanwhile, GBP / USD has remained in a narrow range after the Wall Street Journal reported that the Fed would likely start to tighten at the next meeting. The statement said the bank will start cutting its quantitative easing program by about $ 15 billion per month. Some analysts expect the Fed to start raising interest rates sooner than expected.
The next key catalyst for the GBP / USD will be the latest US consumer confidence data coming out in the US session. Data from the Conference Board should show that confidence dipped slightly in October. Consumers are likely concerned about the state of inflation and current supply chain challenges.
GBP / USD will also react to Rishi Sunak’s fall budget which will be delivered on Wednesday this week.
GBP / USD forecast
The four hour chart shows that the GBP / USD pair has been trending downward over the past few days. The pair fell about 0.4% from its highest level this month. It is also along the bottom line of the ascending channel pattern that is shown in red. The pair also fell below the 25-day moving average.
GBP / USD is also slightly above the Ichimoku Cloud as both MACD lines continued the downtrend. Therefore, the pair may rebound as buyers target the channel high around 1.3850. On the other hand, a move below key support at 1.3720 will invalidate the bullish view.