GBPUSD | Perspective for the new week | Follow-up

Updated

The Pound Sterling (GBP) extends its correction against the US Dollar following the release of weaker-than-expected UK Retail Sales data for June, showing a monthly contraction of 1.2% against the expected 0.4% decline and the previous month's growth of 2.9%.

🔍 Key Highlights:

📉 Retail Sales Data: A significant indicator of consumer spending, the sharp decline suggests households are struggling with higher interest rates from the Bank of England (BoE).
💼 Economic Conditions: The rise in claimant count claims may indicate worsening economic conditions, favoring inflation doves on the BoE's Monetary Policy Committee.
💸 Inflation and Interest Rates: Annual inflation in the UK remained stable in June compared to May. However, the BoE points to persistently high service inflation at 5.7% and strong wage growth as barriers to cutting interest rates.
📉 BoE Rate Cuts: The probability of a rate cut by the BoE next month has declined, despite positive sentiment towards the new British government.
📊 Technical Analysis:
In this video, I illustrate the technical aspects to watch out for to navigate the current market dynamics effectively. I also discuss key levels and potential scenarios for the GBPUSD in the coming days.

GBPUSD Technical Analysis:
Will the pound maintain buying pressure above $1.29000? Watch this video for key trades this week. Join the discussion for updates on GBP/USD trading. Stay tuned for more content. Happy trading!
#GBPUSD #Forex #Trading #TechnicalAnalysis #UKEconomy #BankofEngland #Inflation #MarketAnalysis #TradingStrategies

Disclaimer Notice:
Trading in the foreign exchange market and other instruments carries high risk and may not be suitable for all investors. The content provided here is for educational purposes only. Evaluate your financial situation and consult with a financial advisor before making any investment decisions. Past performance is not indicative of future results.

Note

The GBPUSD pair currently trading above the ascending trendline on the daily chart 📈 [identified in my recent video], indicating a bullish bias. The pair attracted buyers during the Asian session, halting its recent corrective slide from a one-year peak reached last week.

Fundamental Drivers:

👉 USD Weakness: The US Dollar is experiencing weakness at the start of the week 📉, fueled by recent US political developments. This provides support for the British Pound.

👉 BoE Rate Cut Prospects Diminish: The Bank of England's (BoE) likelihood of cutting interest rates in August continues to decrease ⬇️. Recent economic data, including a stronger-than-expected GDP growth of 0.4% in May and a 2% YoY rise in UK consumer inflation in June 📈, have prompted investors to push back their expectations for a rate cut. BoE Chief Economist Huw Pill further solidified this sentiment, noting that inflation remains persistent.

Outlook:
The current fundamental backdrop appears to favor bullish traders 📈. In the absence of significant market-moving economic data releases today, GBPUSD could continue its intraday appreciating move.

We will closely monitor the newly identified structure on the 1H timeframe as a guide for today's trading activity.

Good Morning

Note

The GBP/USD pair is currently trading in a narrow range, consolidating above our week's key level of $1.2900. While the Pound Sterling has shown resilience against the US Dollar, the recent recovery move in the USD, driven by speculation surrounding a potential Donald Trump victory in the upcoming US presidential election, has stalled.

Market Focus Shifts to US Economic Data:
The current consolidation phase suggests a market waiting for fresh impetus. This week, key US economic data releases will likely provide this direction. Traders are closely watching:

📈 Preliminary S&P Global Purchasing Managers Index (PMI) for July: This will offer insights into the health of the US manufacturing sector and broader economic activity.
📊 Q2 Gross Domestic Product (GDP): The second-quarter GDP report will provide a gauge of the US economy's overall growth trajectory.
🛒 Durable Goods Orders and Personal Consumption Expenditures Price Index (PCE) data for June: These reports will offer insights into consumer spending trends and inflation pressures.
Implications for the Fed's Rate Path:

The data releases this week are particularly significant as they could offer crucial clues about the timing of the US Federal Reserve's next rate move. Market participants are closely monitoring for any indication of whether the Fed will begin reducing interest rates later this year.

As we anticipate these events, the levels on the chart remain valid for identifying trading opportunities.

Good Morning

Trade active

The GBP/USD pair traded under selling pressure below the $1.2900 level during the Asian session. 📈 A modest recovery in US Treasury bond yields is supporting the US Dollar (USD), giving it an edge over the British Pound (GBP) in the last 13 hours. However, the GBPUSD is exhibiting resilience, with a significant depreciating move for the GBP unlikely at this time.

Key Factors:
🛡️ Risk-Off Sentiment: A softer risk tone is providing further support for the USD.
📉 Fed Rate Cut Expectations: Sentiment supporting bets for a rate cut by the Federal Reserve (Fed) in September may cap USD gains.
⬆️ BoE Rate Cut Odds: Diminishing odds of an August rate cut by the Bank of England (BoE) could act as a tailwind for the GBP.

Technical Outlook:
📉 Given the bullish outlook for the GBP, the extent of this bearish retracement will be closely monitored. The newly identified descending trendline will guide today's trading activity. A convincing break below $1.28840 would act as a fresh trigger for bears, paving the way for deeper losses. Conversely, a breach of both the descending trendline and the $1.2900 zone will likely attract fresh buyers.

With market participants anticipating today's macroeconomic data, it is prudent to secure some profit now.

Good Morning

Trade active

The GBPUSD pair continues to exhibit choppy trading and a bearish bias, reflecting the Pound Sterling's (GBP) recent weakness against major peers. This downward pressure stems from market expectations of a potential policy normalization by the Bank of England (BoE) in its August meeting.

While a majority of economists surveyed by Reuters (80%) anticipate a 25 basis point (bps) rate cut to 5% in August, market participants are only pricing in a 45% probability of such a move. This disparity likely stems from the absence of explicit endorsement for rate cuts from BoE officials, leading to heightened uncertainty in the market.

Despite the bearish sentiment, recent economic data provides a glimmer of hope for the GBP. The preliminary UK S&P Global/CIPS report for July showed a robust start to the third quarter, with the Composite PMI exceeding expectations at 52.7. This positive performance was driven by growth in both the manufacturing and services sectors.

However, the bearish bias persists. We maintain a bearish outlook as long as the GBPUSD price remains below the week's key level at $1.29000. A decisive breakout/retest of this level could present potential buying opportunities.

Good Morning

Trade active

Following a lacklustre week, the Pound Sterling (GBP) exhibited a steady performance against the US Dollar (USD) during the Asian session amidst conflicting signals emerging from the Bank of England's (BoE) policy outlook.

Recent poll reports indicate a strong consensus among economists that the BoE will announce a rate cut at its August meeting. This sentiment has contributed to recent bearish pressure on GBP. However, despite the annual headline Consumer Price Index (CPI) returning to the central bank's target of 2%, BoE policymakers remain hesitant to support rate cuts. They are concerned about persistent inflationary pressures driven by strong wage growth momentum in the service sector.

Despite the uncertain rate outlook, the UK's economic fundamentals remain positive. Manufacturing and service sector activities are expanding, suggesting robust economic growth. This positive outlook could provide some support for GBP in the near term.

From a technical perspective, GBPUSD is currently trading within a descending channel. This pattern suggests a potential for further downside movement. It is hereby recommended that we secure profits from existing sell positions and use the descending channel as a guide for today's trading activities.

Good Morning

darcsherry

Trade smart. Trade consciously

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GBPUSD | Perspective for the new week | Follow-up

by darcsherry

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