Long

GBPUSD Long Buyers to retain control

Updated

Targets
1.35
1.39.
1.48

See the chart above

GBP/USD entered a consolidative phase in a holiday-shortened week.

Eyes on United States inflation data, UK jobs report and BoE’s Bailey in the week ahead.

Risks remain skewed to the upside whilst above 1.2600, with a bullish RSI.

The Pound Sterling held onto recovery gains against the United States Dollar (USD) this week following a brief correction from 14-month highs. GBP/USD, however, traded in a narrow range, with the upside capped by resurgent US Dollar demand on hawkish US Federal Reserve (Fed) signals and growing recession fears. Traders repositioned ahead of next week’s top-tier United States (US) Consumer Price Index (CPI) and the United Kingdom’s employment data.

Market expectations signaling more tightening by the Federal Reserve later this year drove the US Dollar valuations, while the Pound Sterling drew support from the hawkish pricing of the Bank of England (BoE) terminal rate beyond 6.0%. Against this backdrop, the GBP/USD pair witnessed a tug-of-war, but Pound Sterling bulls eventually held the upper hand following a mixed set of United States economic data in the second half of the week.

At the start of the week, the top-tier US ISM Manufacturing PMI data unexpectedly showed that contraction in the manufacturing sector deepened further. The US Dollar came under renewed selling pressure in an immediate reaction to the downbeat data but quickly regained its footing as the data also rekindled recession fears. Renewed US-China trade tensions also underpinned the safe-haven demand for the Greenback, keeping the upside attempts in check for GBP/USD near the 1.2740 region.

Hawkish signals from the Minutes of the Fed meeting in June also kept the buoyant tone intact around the American Dollar. The Minutes showed that almost all Fed officials indicated that further tightening is likely. US Treasury bond yields extended their upsurge on the hawkish Fed outlook, with the benchmark 10-year Treasury bond yields hitting their highest level in four months above the key 4.0%.

In the latter part of the week, US Dollar sellers returned on mixed US JOLTS Job Openings data and the ISM Services PMI. Job Openings fell to 9.82 million at the end of May, dropping from an upwardly revised 10.3 million in April, according to the BLS’ latest Job Openings and Labor Turnover Survey report. Markets had expected openings to fall to 9.935 million in May. The June US ISM Services purchasing managers' index (PMI) came in at 53.9, which was above the 51.0 forecast. Despite the upbeat headline number, the ISM Services components were mixed, which failed to impress US Dollar bulls.

GBP/USD briefly took a flight to 1.2800 but lost the bullish momentum as Pound Sterling traders turned on the sidelines ahead of Friday’s highly-anticipated US NFP data release. The pair resumed its advance and flirts with the 1.28 figure, as the US added just 209K new jobs in June, missing expectations, while the Unemployment Rate declined to 3.6% as expected. The USD initially fell, although higher-than-anticipated wages limited optimism. Average Hourly Earnings rose 0.4% MoM and 4.4% YoY, reflecting remaining pressures in the inflation front and therefore, leaving the door open for additional monetary tightening.

Pound to Dollar forecast by day
Date Weekday Min Max Rate
10/07 Monday 1.274 1.312 1.293
11/07 Tuesday 1.277 1.315 1.296
12/07 Wednesday 1.276 1.314 1.295
13/07 Thursday 1.278 1.316 1.297
14/07 Friday 1.277 1.315 1.296
17/07 Monday 1.285 1.325 1.305
18/07 Tuesday 1.282 1.322 1.302
19/07 Wednesday 1.272 1.310 1.291
20/07 Thursday 1.276 1.314 1.295
21/07 Friday 1.276 1.314 1.295
24/07 Monday 1.273 1.311 1.292
25/07 Tuesday 1.271 1.309 1.290
26/07 Wednesday 1.271 1.309 1.290
27/07 Thursday 1.268 1.306 1.287
28/07 Friday 1.265 1.303 1.284
31/07 Monday 1.269 1.307 1.288
01/08 Tuesday 1.281 1.320 1.300
02/08 Wednesday 1.285 1.325 1.305
03/08 Thursday 1.295 1.335 1.315
04/08 Friday 1.288 1.328 1.308
07/08 Monday 1.290 1.330 1.310
08/08 Tuesday 1.303 1.343 1.323
09/08 Wednesday 1.304 1.344 1.324
10/08 Thursday 1.303 1.343 1.323

Note

Wall Street Extends Gain Ahead of CPI Data
US stocks closed higher on Tuesday, extending gains for the second session, as investors looked forward to the key inflation report due tomorrow. The Dow Jones finished over 316 points higher, as Salesforce rose 3.9% after the company announced it will be increasing list prices an average of 9% in August. 3M and Boeing were also among the top performers and advanced by 4.8% and 2.6%, respectively. The S&P 500 gained nearly 0.7%, led by the energy sector as APA (+6.3%), Halliburton (+4.2%) and Schlumberger (+4.5%) outperformed. Meanwhile, the Nasdaq added 0.5%. Traders were also digesting comments from several Fed officials which continued to point to the need of further tightening this year. The odds for a 25bps increase in the fed funds rate this year currently stand at 95%, but investors remain divided about another rate hike. The economic calendar is soft today and the earnings season kicks off later in the week.

Note

The greenback is approaching a make-or-break moment — at least as far as a closely watched technical indicator is concerned.

The Bloomberg Dollar Index has now surrendered more than 61.8% of its gains since May 2021, bringing it to one of the Fibonacci retracement levels popular among chart watchers. They tend to keep a close eye on these indicators to determine whether or not trends will extend or reverse.

What happens next is therefore crucial.

If the index remains below this point over the coming sessions, it would be a strong signal to traders that the currency’s losses are the beginning of a new longer-term downtrend, and not just an aberration.

The latest bout of weakness comes as the market now sees an end to a tightening spree that Federal Reserve officials begun communicating more than two years ago. The prospect is narrowing interest-rate differentials with other major currencies and weighing on the dollar.

This week, it dropped to the weakest level against euro and pound since early 2022. It’s even falling out of favor against the yen — where rates are still negative — with the cross falling to a two-month low.

The bearish signal seen in the chart of the Bloomberg Dollar Index could be soon validated elsewhere too. The ICE Dollar Index — a popular alternative to the BBDXY — stands just 0.6% higher than the 61.8% Fibonacci retracement of a rally that kicked off in January 2021.

To be sure, options paint a more mixed picture. While long-term bets are supportive of the US currency’s prospects, sentiment over a one-month sentiment has reached its least bullish level since September 2020.

Note

Week Ahead - July 17th

Next week, investors will focus on the earnings results from major US companies, such as Bank of America, Morgan Stanley, Goldman Sachs, IBM, Netflix, Tesla, and Johnson & Johnson. Additionally, it will be interesting to monitor retail sales, industrial production, and housing data, including existing home sales, housing starts, and building permits. In other news, China is set to release Q2 GDP growth, retail sales, industrial production, and fixed asset investments. Markets will also be attentive to inflation rates in the United Kingdom, Canada, Japan, New Zealand, and South Africa. Furthermore, the central banks of Turkey and South Africa will make decisions regarding monetary policy, Australia will publish the unemployment rate, and the UK and Canada will release retail sales data.

Note

bullish

Note

Bond Yields Continue to Fall
Government bond yields around the world fell for a third day on Wednesday, with the US 10-year Treasury note yield retreating to 3.74%, a fresh low since late June. Investors are getting increasingly convinced that major central banks, and specially the Fed will soon end their tightening campaign. Bets for a 25bps hike in the fed funds rate next week currently stand at 97% but investors remain divided on the need of further increases, with chances for a September increase currently standing at 12% and for November at 23%. Meanwhile, the ECB is also set to raise rates by 25bps again next week while there is just a 70% chance of a further rate rise in September. In the UK, another increase in borrowing costs is seen as certain next month, but a smaller-than-expected inflation reading for June lowered bets on further BOE rate hikes. On the other hand, traders are increasingly speculating the Bank of Japan could adjust its ultra loose monetary policy next week.

European Markets Head for Higher Open
European equity markets were headed for a higher open on Wednesday as investors reacted to data showing the annual consumer inflation in the UK stood at 7.9% in June, the lowest reading since March 2022 and below forecasts of 8.2%. Investors also await final euro zone inflation figures later on Wednesday to guide the economic and monetary policy outlook in the region. Moreover, markets look ahead to the latest earnings report from Dutch chip industry giant ASML, as well as from major US firms such as Tesla, Netflix and Goldman Sachs. DAX and Stoxx 600 futures rose 0.2% in premarket trade, while FTSE 100 futures jumped 0.8%.

Note

This trade is stil open and active

relevant market wraps
European Markets Head for Muted Open

European equity markets were headed for a muted open on Thursday as investors braced for the start of the earnings season in the region. Major European firms slated to report earnings today include SAP, EasyJet, Volvo Car, Publicis, ABB and Nokia. Investors also turned cautious after shares of key technology names in the US dropped in post-market trade on disappointing quarterly results. DAX, Stoxx 600 and FTSE 100 futures all fluctuated around the flatline in premarket trade.
Gold Hits 2-Month High on Fed Pause Bets
Japan 10-Year Yield Steadies Around 0.46%
Japan’s 10-year government bond yield steadied around 0.46% as a dovish outlook on Bank of Japan monetary policy kept the benchmark yield below the upper limit of the target range. BOJ Governor Kazuo Ueda recently stated that there was still some distance to sustainably and stably achieve the central bank’s 2% inflation target, indicating the BOJ’s commitment to ultra-easy monetary policy. Last month, the central bank held its short-term interest rate target at -0.1% and that of 10-year bond yields at around 0% by a unanimous vote, in line with expectations. Falling bond yields in other major economies also reduced upward pressure on JGB yields, as easing inflationary pressures raised hopes that the end of the current monetary policy tightening cycle is close.

Japan Raises This Year’s Price View to 2.6% Ahead of BOJ Meet
The Japanese government raised its overall inflation forecast to 2.6% for the current fiscal year ahead of the central bank’s policy decision meeting next week, the Cabinet Office said Thursday. The upward revision from the previous forecast of 1.7% shows stronger-than-expected inflationary pressure. Japan saw that trend holding up even after accounting for government price-relief measures, which the Cabinet Office says shaves 0.5 percentage points off this year’s price reading. For fiscal 2024, the government expects overall inflation to slow to 1.9%.

Note

trade is open

Note

trade is open.
Trade setup as on the chart above explained and mentioned is open(See the Time Frame): The Trade setup above is only based on daily,weekly,monthly and 4 Hours timeframe. For daytraders who are involved on lower time frame you need to calculate or possibly use your other strategies. The trade setup above is only created for trend followers, also daytraders can benefit of it, if they choose to.

DaveBrascoFX

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