Economic risks support selling GBPUSD to level of 1.2060

The GBPUSD currency pair is restoring its positions on Tuesday after a five-day round of declines, rebounding from the 15-month low of 1.2098 recorded on Monday. The latest growth is supported by the improving sentiment of investors. 

The main driver was the news about possible gradual implementation of tariffs by the new administration of US President-elect Donald Trump. This approach aimed to increase negotiating leverage and prevent a sudden spike in inflation causes a moderate decline in US Treasury bond yields and reduces demand for the dollar. This strategy helps avoid inflationary risks and build confidence in global markets regarding the future White House administration. 

However, the upside potential of the pound is limited due to concerns about stagflation in Great Britain. High inflation and weak economic growth are still alarming. Moreover, rising yields on British government bonds are fuelling concerns about the country's financial stability. Investments in government debt are being reduced amid fears regarding growing debt and slowing growth of economy. 

Traders are awaiting the release of key inflation data. The producer price index is due today, and the US consumer inflation data will be released on Wednesday. They may adjust investors' expectations regarding further monetary policy of the Federal Reserve (Fed). Additionally, the market participants are focused on the speeches of Fed representatives. 

Technical data on GBPUSD indicates the formation of a downtrend on the H4 timeframe. According to the wave analysis, the currency pair is forming a quadruple ascending wave on the H1 timeframe. Relative Strength Index (period 14) indicates the possibility of changing the movement direction and the beginning of the fifth descending wave, which is confirmed by divergence. 

Short-term prospects for the GBPUSD currency pair suggest selling with the target of 1.2060. Part of the profit should be taken near the level of 1.2135. A Stop loss could be set at 1.2305.

Since the bearish trend is short-term, the trading volume should not exceed 2% of your total balance to reduce risks.