GBP/USD Analysis: Positive Bias Holds Amidst Trading Range and Upcoming Economic Data
The GBP/USD pair exhibits a positive bias for the second consecutive day on Tuesday, touching a three-day high around the 1.2770 area during the Asian session. Despite this upward movement, the spot prices remain confined within a familiar trading range that has persisted over the past three weeks. This situation calls for cautious positioning before anticipating an extension of the recent rebound from the 1.3615 area, also representing the 100-day Simple Moving Average (SMA) support.
The British Pound (GBP) is underpinned by expectations of further interest rate hikes by the Bank of England (BoE), serving as a tailwind for the GBP/USD pair. The market currently indicates more than an 80% likelihood of a 25 basis point increase at the upcoming BoE meeting in September. This sentiment has been bolstered by record wage growth in the UK during the second quarter, adding to concerns about sustained inflation even after 14 consecutive rate hikes. Additionally, the optimistic UK GDP report and slightly higher UK CPI print contribute to the prospects of enhanced BoE policy tightening.
In contrast, the US Dollar (USD) hovers just below its more than two-month high reached last week, curbing aggressive bullish bets around the GBP/USD pair, at least in the short term. The prevailing consensus is that the Federal Reserve (Fed) will maintain its hawkish stance and sustain higher interest rates for a longer duration, leading to elevated US Treasury bond yields. This sentiment is coupled with a generally weaker risk appetite, strengthening the position of the safe-haven Greenback. The market sentiment remains fragile amid concerns about deteriorating economic conditions in China.
Investors may opt to remain cautious ahead of the Jackson Hole Symposium scheduled for later in the week. Central bankers’ comments during the event could introduce significant volatility to the markets, providing fresh impetus to the GBP/USD pair. Attention will also be on the flash PMI readings from both the UK and the US on Wednesday, offering insights into the economic health and potential for further interest rate hikes by their respective central banks. In the interim, Tuesday’s trading will be influenced by the US economic calendar, featuring releases such as Existing Home Sales and the Richmond Manufacturing Index.
GBP/USD Technical Outlook:
The GBP/USD pair finds support around the 1.2725 level and initiates an ascent from there, aiming to achieve projected gains for the day. Our suggestion is to test the 1.2825 level initially, with a break serving as a key to unlock additional gains toward 1.2945.
The EMA50 provides underlying support from below, reinforcing expectations of upward movement in the upcoming sessions. It’s worth noting that a breach below 1.2725 would halt the bullish trend, potentially leading the price to resume its bearish trajectory.
The anticipated trading range for the day lies between the 1.2700 support and the 1.2870 resistance.
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