- For three trading sessions in a row, the price of the GBP/USD currency pair is moving in the midst of a rebound to the upside, with gains that reached the resistance level of 1.2960, after a decline in the US dollar after the US Federal Reserve announced yesterday.
- The currency pair stabilizes around 1.2940 at the beginning of Thursday's trading.
- All in all, the GBPUSD exchange rate reached a new high of 1.3140 on July 13 amid broader USD selling linked to evidence that US inflation was falling sharply and that the Federal Reserve would soon be in a position to cut interest rates.
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But the recovery of the US dollar during the second half of July amid continued evidence of US economic strength, pushed the pound against the dollar to a temporary low of 1.2797, which it reached on Monday.
Overall, the pound sterling remained the leader among this year's major currencies in recent trading but with market interest rate assumptions pointing to the approaching unprecedented monetary tightening still to come for the economy, the opportunity or necessity to protect against future currency losses is rarely greater. The pound was higher for the year against all G10 currencies except the Swiss franc on Wednesday while it also rose relative to most in the broader G20 basket after an outperformance that helped reverse nearly two-thirds of losses.
But key technical resistance levels now loom large on the charts for both these currencies as well as in a number of other pairs while market assumptions about the Bank of England (BoE) rate are likely, if not very likely, to be at significant risk. From course correction next Thursday.
Analysts and economists have raised their BoE rate expectations significantly since the swap markets first responded to employment and inflation figures released in May and June, with the expected year-end peak rising to 6.5% before easing to 5.75% by Wednesday. The conventional assumption, belief, or claim is that without these further increases in borrowing costs, inflation is unlikely to return to the 2% target soon enough, although recent economic developments in both the UK and Europe suggest that the bank rate It may have already risen. And far enough, if not too far.
GBP/USD Technical Outlook
Attempts to rebound upwards for the GBP/USD pair lack the momentum to change the market's view to a bullish one, and this requires launching towards the resistance levels 1.3040 and 1.3150, respectively. According to the performance on the daily chart below, there is still a threat to move lower, and returning to break the support at 1.2790 will give the bears more momentum to move strongly down.
Technical indicators will not head towards strong oversold levels over that period of time without moving towards and below the support level of 1.2600. The GBP/USD today will be affected by the reaction from the US Federal Reserve's announcement, as well as the reaction from the results of a package of US data led by the GDP growth rate, durable goods orders, and the number of weekly US jobless claims.
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