GBP/USD Forecast: Bulls eye 1.3570 as the next target

GBP/USD has extended its rebound after UK inflation data.
The technical outlook suggests there is more room on the upside before GBP/USD turns overbought.
The next bullish target is located at 1.3570.

Eren Sengezer FXStreet

GBP/USD has preserved its bullish momentum following Wednesday's advance and trades at fresh eight-day highs above 1.3500 early Thursday.

The stronger-than-expected Consumer Price Index (CPI) data from the UK reminded investors of the strong probability of the Bank of England (BoE) hiking the policy rate by 20 basis points in December and provided a boost to the British pound. Additionally, the modest selling pressure surrounding the greenback on falling US Treasury bond yields helped bulls to continue to dominate GBP/USD's action.

In the meantime, things remain relatively quiet on the Brexit front, allowing GBP/USD to continue to retrace the BoE-inspired drop.

The US Department of Labor's weekly Initial Jobless Claims will be the only data featured in the US economic docket. Furthermore, market participants will keep a close eye on US Treasury bond yields following Wednesday's sharp decline. Unless the benchmark 10-year US T-bond yield reclaims 1.6%, the greenback could find it difficult to outperform its rivals. Additionally, S&P Futures are up 0.2% in the early European session and the dollar could face additional selling pressure in case risk flows start to dominate the markets in the second half of the day.

GBP/USD Technical Analysis

Although the last six candles on the four-hour chart closed in positive territory, the Relative Strength Index (RSI) indicator stays below 70, suggesting that there is more room on the upside before GBP/USD becomes technically overbought.

As of writing, the pair is trading above 1.3500 - the Fibonacci 61.8% retracement of the downtrend witnessed following the BoE's decision to leave its policy rate unchanged earlier in the month. In case buyers manage to continue to defend this level, GBP/USD could continue to push higher toward 1.3550 (100-period SMA) and 1.3570 (static level).

On the downside, 1.3470 (Fibonacci 50% retracement, 50-period SMA) aligns as the first support before 1.3440 (Fibonacci 38.2% retracement) if 1.3500 fails.

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

AUD/USD hangs close to monthly lows, still defends 0.7100 ahead of Fed decision

AUD/USD retains its negative bias for the third straight day, defending 0.7100 while trading close to a monthly low in Wednesday's Asian session on Wednesday. The US Dollar stands firm near a two-week high as the anticipated Fed rate hike and oil-driven inflation fears continue to push US bond yields to a multi-year high. Furthermore, escalating Middle East tensions benefit the safe-haven buck and weigh on the risk-sensitive Aussie.

USD/JPY holds firm above 155.00, awaits Fed policy announcements

USD/JPY climbs to a fresh one-week high above 155.00 in the Asian session on Wednesday amid a bullish US Dollar. Oil-driven inflation fears, along with the anticipated Fed rate hike, continue to support surging US bond yields. Moreover, rising US-Iran tensions underpin the USD's reserve currency status. The pair, however, remains below the mid-155.00s as bulls seem hesitant ahead of the Fed decision later today and the BoJ meeting, starting on Thursday.

Gold defends key $4,280 support ahead of Fed verdict

Gold is attempting another run above $4,300 early Wednesday, replicating a tepid bounce seen in Tuesday’s Asian trading. Gold’s next major directional move depends on the US Federal Reserve monetary policy decision and outlook due later in the day.

Ethereum continues to attract capital despite impending rate hike and Clarity Act failure

Ethereum declined to $2,400 on Tuesday after the Clarity Act failed to progress in the Senate. Despite that and the market's near certainty of an interest rate hike at the next Federal Reserve (Fed) meeting, the top altcoin has continued to attract fresh capital. Ethereum buyers have been dominating sellers over the past few days.

August UK inflation report expected to show rising inflation

The United Kingdom Office for National Statistics will publish the highly anticipated Consumer Price Index data for August on Wednesday at 06:00 GMT. The inflation report could trigger volatility in the British Pound, as it comes just one day before the Bank of England monetary policy decision.

How Japan became the World's Banker and why that era may be ending

Japan's ultra-low interest rates helped finance trillions of dollars in global investments for more than a decade, making the Japanese Yen one of the world’s cheapest sources of funding. With the Bank of Japan expected to tighten policy again this week, that advantage may be entering a new phase. While most major economies raised interest rates, Japan remained the world's outlier.