The GBPUSD is correcting within an upward channel.
On Tuesday, the American dollar became weaker amid increased market uncertainty over the conflict in the Middle East and comments from senior officials of the U.S. Federal Reserve (Fed).
The conflict between Israel and Palestine is adding to market volatility and uncertainty ahead of the start of the corporate reporting season and in anticipation of important U.S. inflation data this week.
Benchmark 10-year Treasury yields retreated sharply from their 2007 highs. The dollar index fell on comments from Fed officials. As they said on Monday, rising long-term bond yields could keep the regulator from further interest rate hikes.
Now market participants are looking forward to the minutes of the U.S. central bank's September meeting. They will be published on Wednesday. The release of Consumer Price Indicators is also expected on Thursday. These data may provide clues about the Fed's future plans for interest rates.
Meanwhile, Ben Broadbent, Deputy Governor of the Bank of England, said last week that the next interest rate hike remains an open question. He also noted that inflation will approach the desired level in about two years, as the terms of trade improve due to the gradual tightening of monetary policy.
Commerzbank's economists analyze the British regulator's monetary policy. In their opinion, wages rose more strongly in the year to September than in the previous month. Wage growth forecasts for the coming year are also higher than they were in August.
Despite the improvement in inflation in recent months, wage growth shows that consumer prices may be more resilient than the Bank of England had anticipated.
The GBPUSD currency pair has breached a descending resistance line on the H4 timeframe. The price is now forming an upward corrective channel on the H1 timeframe.
The volume of the Bulls Power indicator is decreasing, but still remains in a positive zone. This indicates that buyers have some control over the pair's pricing.
The short-term outlook for GBPUSD is to buy.
The target is at the level of 1.2370
Part of the profit should be fixed near the level of 1.2270
A Stop loss should be placed at the level of 1.2150
The bullish trend is of a short-term nature, so it is suggested to limit the trading volume to no more than 2% of your capital.