The GBPUSD currency pair price experienced a strong pullback from its local high last week, but now it is forming an uptrend. The short-term uptrend line may help the price to reach the level of 1.253 in the coming days. Much will depend on the meetings of the financial regulators in the USA and Britain next week.
The outcome of the meetings may be significantly affected by the events of recent days. First, the Reserve Bank of Australia on Tuesday and then the Bank of Canada on Wednesday unexpectedly decided to raise interest rates by 0.25%. Market participants are now contemplating whether such actions will be a match for similar steps on the part of the Fed and the Bank of England.
As for the U.S. financial regulator, expectations changed insignificantly. The probability of rate hike by 0.25% again rose to 30%, but the high level of volatility of this indicator does not allow to make far-reaching conclusions on its basis. Moreover, before the Fed meeting the figures of May inflation are going to be published, which can significantly change the situation.
In the case of the Bank of England, the outcome of the forthcoming monetary policy meeting seems more predictable. With the second highest inflation rate of any developed country in the world (after Austria), the British regulator has to continue the cycle of interest rate hikes. The probability of a pause in the cycle of rate hikes is very low, as in this case, the actions of the central banks in Australia and Canada will lead to their national currency growth against the pound and an even greater acceleration of inflation in the UK.
As long as the GBPUSD pair maintains the current uptrend, the main scenario is the return to the highs of the previous week at around 1.253. The RSI indicator is near the level of 50 and does not prevent the price rise. The trend of strengthening of the pound against the dollar will be broken only if the price of the GBPUSD pair is fixed below 1.24.
The following trading strategy can be suggested:
Buy GBPUSD in the range of 1.243–1.246. Take profit — 1.253. Stop loss — 1.24.
Traders can also use a Trailing stop instead of a fixed Stop loss at their discretion.