While the outlook is neutral, there is a possibility that it will have a bearish breakout ahead of the upcoming UK inflation data.
- Sell the GBP/USD pair and set a take-profit at 1.2150.
- Add a stop-loss at 1.2320.
- Timeline: 1-2 days.
- Set a buy-stop at 1.2300 and a take-profit at 1.2400.
- Add a stop-loss at 1.2195.
The GBP/USD pair moved sideways as investors refocused on the upcoming UK consumer and producer inflation data scheduled for Wednesday. It is trading at 1.2241, which is a few points above the lowest level on Monday.
UK rail strike
The GBP/USD pair moved sideways as investors reflected on the impact of the upcoming strike among rail workers in the UK.
The strike, which will start on Tuesday, will see more than 40k workers in 13 train operating companies down their tools in the biggest strike since 1989. This strike will see significant disruptions in an economy that is staring at a recession.
There are also worries that other sectors of the UK sectors will go on strike. In a statement on Monday, a prominent labor union official warned that public workers like doctors and nurses were considering joining the protests.
The strike comes at a time when the UK economy is facing significant headwinds as inflation soars. The country’s output has also contracted in the past two straight month.
The next key data to watch will be the upcoming UK consumer and producer inflation data. Analysts expect the data to show that the country’s inflation soared in May. The headline CPI is expected to come in at 9.1%, the highest level in decades.
These inflation numbers will signal that the Bank of England’s rate hikes have not helped lower inflation. The bank has hiked rates five times since December. In its decision last week, it hinted that more hikes were coming, which explains why the 10-year Gilts have jumped to the highest point since 2014.
The GBP/USD will also react to the latest existing home sales numbers that will come out on Tuesday. Analysts expect the data to show that sales declined in May as mortgage rates rose.
The GBP/USD pair is trading at 1.2246, which is slightly above last Friday’s low of 1.2175. On the four-hour chart, this price is also slightly above the key support at 1.2156, which was the lowest point on May 13th. It is also moving along the 25-day and 50-day moving averages while the MACD is along the neutral level.
Therefore, while the outlook is neutral, there is a possibility that it will have a bearish breakout ahead of the upcoming UK inflation data. If this happens, the next key support level will be at 1.2150.