GBP/USD Facing 2 Major Support Levels As Sellers Remain in Control
GBP/USD was quite bullish until the middle of July, as it reached 1.3150. But made a reversal up there and has been bearish since then, losing around 6.5 cents since then. Moving averages which were acting as support on the daily chart have turned into resistance. Although sellers are facing the 200 SMA (purple) at around 1.25 which is a major round level, followed by the previous resistance at 1.2450.
The Bank of England (BOE) appears to be adopting a less hawkish stance, as evidenced by a notable change in the statement, indicating a preference for a “higher for longer” approach rather than further rate hikes. Recent key economic data, such as the latest employment report, has shown continued wage growth despite a rise in the unemployment rate. Additionally, UK Consumer Price Index (CPI) figures surpassed expectations, suggesting the possibility of stagflation, which is a combination of stagnant economic growth and inflation.
The UK Purchasing Managers’ Index (PMI) numbers have consistently fallen short of expectations, particularly in the services sector, which has slipped into a state of contraction. Currently, the market anticipates that the Bank of England will implement a 25 basis points (bps) interest rate hike at its upcoming meeting.
Federal Reserve Chair Powell has reiterated the Fed’s commitment to being data-dependent and has not ruled out any policy options. Inflation measures have continued to show a trend towards lower inflation since then. The labor market has exhibited some signs of weakening, although it remains relatively tight overall. Recent economic data has been more disappointing than anticipated, leaning towards negative surprises.
Federal Reserve members are increasingly inclined towards a policy pause rather than another interest rate hike. Currently, the market does not anticipate the Fed to implement any further rate hikes. However, there was a shift in market expectations after a recent increase in the likelihood of a November rate hike following a positive jump in the ISM services index.
GBP/USD Live Chart
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