GBPUSD | Perspective for the new week | Follow-up

Updated

In this video, we examine the recent performance of the GBP/USD, which closed Friday at a fresh five-week low, marking its third consecutive week of decline. The Bank of England's (BoE) recent interest rate decision did little to bolster confidence in the British pound. Meanwhile, a late-week surge in the US Purchasing Managers Index (PMI) dampened risk appetite, giving the US Dollar a lift heading into the weekend.

On Thursday, the pound and UK bond yields fell after the BoE left interest rates unchanged at 5.25%. Some policymakers noted that their decision not to cut rates was "finely balanced". Additionally, British inflation data revealed a drop to 2% in May, hitting the BoE's target for the first time since 2021. However, concerns remain over underlying price pressures, particularly in the services sector.

With positive US economic data reducing the likelihood of an early rate cut from the Federal Reserve (Fed), market sentiment shifted towards the safe-haven Greenback on Friday.

Looking ahead, UK economic data remains sparse heading into next week, leaving Sterling traders focused on next Friday’s Gross Domestic Product (GDP) release. In the US, economic data releases are also limited to mid-tier reports early next week, with the US GDP update scheduled for next Thursday.

GBPUSD Technical Analysis:
Will the pound maintain selling pressure below $1.26750? Watch this video for key trades this week. Join the discussion for updates on GBP/USD trading. Stay tuned for more content. Happy trading!

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Note

The GBP/USD maintained a range-bound pattern during the Asian trading session, influenced by the ongoing policy divergence between the Bank of England (BoE) and the Federal Reserve (Fed). This divergence has exerted downward pressure on the pair, although a stable risk sentiment has tempered any significant declines, resulting in a sense of uncertainty among market participants as they evaluate the market implications of this dynamic.

The British Pound (GBP) has been weakened by the BoE's recent dovish stance, which has increased expectations of a potential interest rate cut at the upcoming August monetary policy meeting. Furthermore, the latest flash UK PMI data, released last Friday, indicated a slowdown in private sector business activity in June, contributing to the bearish sentiment towards the GBP/USD pair. Concurrently, ongoing USD strength has further weighed on the pair.

Additionally, Market participants are still pricing in the possibility of two interest rate cuts by the Fed in 2024 amid signs of easing inflationary pressures in the US. This could limit any further appreciation of the USD, helping to restrict the downside for the GBP/USD pair. Traders might also refrain from placing aggressive directional bets ahead of the UK general election on July 4 due to the absence of any significant market-moving macroeconomic data from the UK.

With the focus turning towards speeches from Fed policymakers against a relatively scanty economic calendar in both the UK and the US today, the newly identified structure on the 1-hour timeframe will be our guiding light for trading activities.

Good Morning

Trade active

Buy position triggered; secure position

Trade active

#GBPUSD

Second buy position triggered; secure some profit

Trade active

#GBPUSD

Secure profit, while we look out for new trading opportunities

Trade active

The British Pound (GBP) appears to be stabilizing, recovering from last week's losses and supported by an extended period of US Dollar (USD) weakness due to an improved market sentiment. With key economic data limited this week, market participants are turning their focus to upcoming high-impact economic events for fresh impetus.

Key data points to watch include the Gross Domestic Product (GDP) updates for both the US and the UK later in the week, and the US Personal Consumption Expenditure (PCE) Price Index inflation numbers scheduled for Friday.

Yesterday, Federal Reserve Bank of San Francisco President Mary Daly noted that the 2024 inflation prints have not inspired much confidence when viewed in aggregate, though recent figures have shown promise. Her comments followed earlier remarks from Federal Reserve Bank of Chicago President Austan Goolsbee, who remains optimistic about further progress on inflation, noting that the Fed's policy stance remains appropriately restrictive.

In light of these developments, it is prudent to secure some profits from active buy positions while closely monitoring price action around the ascending trendline and the week's key level at the $1.26750 zone. This strategy will help us navigate potential volatility and capitalize on opportunities as the week progresses.

Good Morning

Note

All buy positions have been closed as the British Pound (GBP) pair continues its sideways consolidative phase, struggling to gain traction. The contrasting policy outlook between the Federal Reserve (Fed) and Bank of England (BoE), coupled with pre-UK election uncertainties, have weighed on the pair despite the prevailing risk appetite in the market.

The absence of significant buying activity warns of the need for caution before considering further upward momentum. Following the Fed's recent unexpectedly hawkish stance on maintaining higher interest rates, speculations in the market suggest a possibility of interest rate cuts by the US central bank in September. This sentiment, in turn, keeps USD bulls cautious, providing support to the GBP/USD pair.

Nevertheless, the BoE's recent dovish stance has limited the upside potential for the British Pound ahead of the UK general election on July 4.

From a technical perspective, we are closely monitoring price action around the confluence where both the ascending trendline and the week's key level at $1.26750 meet. A convincing break below this level will be seen as a fresh trigger for a bearish signal, while some follow-through buying and sustained strength above this structure will suggest that the recent corrective decline has run its course, thereby presenting new buying opportunities.

Good Morning

Trade active

#GBPUSD

As discussed during our live session this morning; secure some profit as two sell positions are triggered.

Trade active

#GBPUSD

Secure some profit

Trade closed manually

All sell positions have been closed in profit as buying pressure resumes. The GBP/USD shows signs of rebounding from its lowest point since mid-May but buying momentum remains subdued. The fundamental backdrop warrants some caution for bulls ahead of key US macro data.

The near-term outlook for the US Dollar remains positive as investors are expected to trade cautiously ahead of tomorrow's US Core PCE data for May. The technical setup suggests that the path of least resistance for the pair is to the downside.

However, if PCE inflation declines as economists expect, it would boost expectations for the Fed to begin reducing interest rates from September which may favour the British pound.

Today, market participants will focus on Initial Jobless Claims data, the revised Q1 Gross Domestic Product (GDP) estimates, and Durable Goods Orders data for May for fresh impetus.

In preparation for today's economic events, the newly identified structure on the chart will be our guiding light for trading activities.

Good Morning

Trade active

#GBPUSD

Two buy position triggered; secure position

Trade closed manually

All buy positions closed with a modest profit as selling pressure is observed following as US GDP reading coming in higher than expected at 1.4% expansion. Market participants might be reluctant to place aggressive bets at this moment as they look forward to tomorrow's UK GDP reading hence we might see some choppy market conditions before the next big move.

The structures indicated on the chart [including the ascending trendline] will be our guiding light going forward.

Trade active

With two buy positions triggered, the GBP/USD pair gained traction this morning after a positive UK GDP reading. The revised Q1 GDP estimates showed the UK economy grew at a faster pace than previously anticipated, registering a 0.7% increase. However, the Pound Sterling remains subdued against the US Dollar ahead of the release of the US core Personal Consumption Expenditures (PCE) Price Index data for May.

Market participants are awaiting the release of the US core PCE inflation data for May, which is expected to have decelerated to 2.6% YoY. A soft inflation reading could boost expectations of early rate cuts by the Federal Reserve, potentially weakening the US Dollar. Conversely, hot inflation data could strengthen the US Dollar and diminish Fed rate-cut prospects.

Given these developments, the technical structure on the chart supports a temporary bullish bias as sellers have struggled to break down the $1.26200 zone over the last 7 days. We are going to secure the buy positions and remain vigilant for new trading opportunities.

Good Morning

Trade active

#GBPUSD

New Structural update ahead of US Core PCE. Please secure the existing buy position and remember all existing levels identified on the previous 1H timeframe remained valid for trading opportunities.

Note

Below is the follow-up detail to the XAU/USD as we prepare for the new trading week [8th - 12th July 2024].

darcsherry

Trade smart. Trade consciously

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GBPUSD | Perspective for the new week | Follow-up

by darcsherry

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