The long-due US dollar correction and increasing odds of a 50 bps BOE rate hike in August brewed a perfect mix for the much-needed recovery in GBP/USD from over two-year lows. Although uncertainty surrounding the UK political scenario and the critical 21-Daily Moving Average (DMA) capped the rebound in the currency pair. Bulls took a breather also ahead of the all-important Fed interest rate decision, US advance GDP and inflation data. In this article, we’ll detail GBP/USD Weekly Technical Forecast for July 25th – 29th.
GBP/USD: What happened last week?
The Fed’s ‘blackout’ period carved out a perfect opportunity for GBP/USD to attempt a comeback after being dumped to the lowest level since March 2020 at 1.1760 a week ago. Easing bets of a 100 bps rate hike, in the face of less hawkish commentary from the Fed policymakers and softening University of Michigan’s Consumer (UoM) Sentiment inflation expectations sub-component, triggered a broad correction in the US dollar from two-decade highs. The probability of a 100 bps Fed rate hike in July dropped below 30% after reaching 90% on hot US inflation data.
Along with the dollar pullback, a chart-driven technical rebound was the main catalyst behind cable’s upturn. Meanwhile, upbeat UK employment data and hotter inflation boosted the chance of a 50 bps BOE rate hike on August 4 to 86%. The UK Consumer Prices Index (CPI) 12-month rate came in at 9.4% in June when compared to 9.1% seen in May while beating estimates of a 9.3% print, the UK Office for National Statistics (ONS) reported on Wednesday. The UK’s official jobless rate stood at 3.8% in May vs. the previous 3.8% and 3.8% expected while the number of people claiming jobless benefits fell by 20K in June. This offered another tailwind to the pair’s recovery, as it reached the highest level in over a week near 1.2050.
GBP/USD: Technical Analysis
In order to regather bullish momentum, GBP/USD needs to hold above 21 DMA, which is currently located around 1.2030, and start using it as support. Additionally, the Relative Strength Index (RSI) indicator on the daily chart is yet to confirm a bullish shift as it stays below 50.
On the upside, next significant resistance seems to have formed at 1.2200 (Fibonacci 23.6% retracement of the latest downtrend, 50-day SMA) ahead of 1.2300 (static level) and 1.2500 (Fibonacci 38.2% retracement).
Supports are located at 1.1900 (psychological level, static level), 1.1800 (the end-point of the downtrend) and 1.1760 (July 14 low).
GBP/USD: Forecast poll
Our Forecast Poll shows that the near-term outlook remains bearish. The one-month outlook, however, paints a mixed picture with an average target of 1.2050.
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