GBPUSD | Perspective for the new week | Follow-up

Updated

The GBP/USD continues to decline, hitting a one-month low below $1.2700. Factors contributing to the British Pound's weakness include declining inflation expectations, potential policy shifts by the Reform Party, and broader economic uncertainties.

Amidst indications of a possible rate cut by the Bank of England this summer, both inflation and the labor market are showing signs of ongoing softening.

In April, inflation dropped below expectations while the latest jobs report revealed concerns as more individuals claimed unemployment benefits in May. With the UK economy stagnant in April and inflation, particularly services inflation, posing challenges, the BoE is closely monitoring the situation.

UK inflation is projected to decrease further, with upcoming data anticipated to show a decline in core CPI y/y to 3.5% and headline CPI y/y to 2.0%. The BoE aims to reach its target inflation rate of 2% soon.

GBPUSD Technical Analysis:
Will the pound maintain selling pressure below $1.27000? 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

Bearish Momentum Continues for GBP/USD

The GBP/USD pair maintains its bearish momentum, driven by hawkish Federal Reserve (Fed) expectations and a softer risk tone favoring the US Dollar (USD). Sellers appear to have found acceptance below our week's key level at $1.2700, suggesting further declines amid the bullish sentiment surrounding the US Dollar. This sentiment was reinforced by the Fed's recent hawkish surprise, projecting only one interest rate cut this year compared to three projected in March. This outlook supports elevated US Treasury bond yields and acts as a tailwind for the USD, validating the negative outlook for the GBP/USD pair.

Potential for a Shift in Sentiment

Despite this, the potential for buyer activity cannot be ignored. Weaker-than-expected US consumer and producer price data released last week indicated signs of easing inflationary pressures. Additionally, an unexpected decline in US import prices further supported the domestic inflation outlook. Combined with a sharp deterioration in US consumer sentiment in June, these factors keep hopes alive for a potential Fed rate cut in September and another in December. This scenario might cap gains for the USD and help limit losses for the GBP/USD pair.

Bank of England's Stance and Upcoming UK Events

Market participants expect persistent price pressures in the UK might compel the Bank of England (BoE) to maintain current interest rates longer than anticipated. This expectation might prevent bearish traders from placing aggressive bets against the British Pound (GBP) ahead of this week's UK CPI report release. Furthermore, the upcoming UK general election on July 4 warrants caution before positioning for any further depreciative moves for the GBP/USD pair.

Trading Plan

To navigate the current market dynamics, the newly identified structure on the chart will guide our trading strategy for the first half of the week.

Good Morning

Note

#GBPUSD

STRUCTURAL UPDATE | 15 Minutes Timeframe

Trade active

#GBPUSD

Buy position triggered; secure position

Trade active

#GBPUSD

The second buy position is triggered; secure position

Trade closed manually

All buy positions have been closed with moderate profit as GBP/USD remains below the week's key level at $1.2700. The US Dollar is stabilizing despite a generally upbeat market mood, with attention focused on today's US macroeconomic data.

Federal Reserve's Stance on Inflation and Rates

Fed policymakers continue to prioritize seeing sustained inflation decline before gaining confidence in lowering interest rates. Philadelphia Fed Bank President Patrick Harker emphasized the need to keep rates unchanged for now to maintain downward pressure on inflation, particularly in sectors like housing and services, including auto insurance and repairs. Harker forecasts one rate cut this year, contingent on economic conditions aligning with his outlook.

Technical Analysis

From a technical standpoint, GBP/USD is back in the $1.2680 zone, where the first buy position was initiated. This level could either signal a retest to continue the uptrend or a potential breakdown. The emergence of buying pressure and reversal patterns around this zone will signal new buying opportunities.

Economic Data and Market Focus

Market participants will closely monitor the US Retail Sales data and Fedspeak today for fresh trading impetus. Stay tuned for further updates as these developments unfold.

Good Morning

Trade active

#GBPUSD

Secure some profit now as we look out for new opportunities

Trade active

The GBPUSD market has experienced renewed bullish momentum over the past 24 hours. Despite the annual inflation rate, as measured by the Consumer Price Index (CPI), declining to 2% in May from 2.3% in April, Pound Sterling buyers remain undeterred.

Even with the headline CPI falling to 2%, Bank of England (BoE) policymakers may be hesitant to discuss early rate cuts as service sector inflation remains persistently high. Service sector inflation grew by 5.9%, only slightly lower than the previous figure of 6.0%, and still nearly double the level needed to control price pressures.

The next key event for the Pound Sterling will be the BoE's monetary policy decision, set to be announced on Thursday. The BoE is widely expected to maintain the interest rate at 5.25%. Consequently, investors will be closely watching the vote split and looking for fresh indications of when the BoE might begin reducing interest rates.

In light of the upcoming BoE interest rate decision, it is prudent to secure all buy positions. We will provide a more detailed analysis of this market dynamic during our upcoming live session.

Good Morning

Trade active

#GBPUSD

As trading activity continues to consolidate above the resistance line of the ascending channel we discussed during the just concluded live stream; We have a new structural set-up on the 15 Mins Timeframe to guide our trading decision today.

As agreed this morning, ensure all buy positions are well secured.

Trade active

The sell position from yesterday's session remains active as the British Pound continues to be undermined by renewed US Dollar strength.

Wednesday's trading activities were subdued, with US markets closed for the midweek Juneteenth holiday. This led to low broad-market volumes, allowing US Dollar counterparties to make slight gains. However, American markets are set to resume today, coinciding with the release of the weekly US Initial Jobless Claims data for the week ending June 14. Median forecasts predict a slight decrease in new jobless benefits seekers, from 242K to 235K.

The Bank of England (BoE) is anticipated to maintain its policy rate unchanged, despite recent signs of easing inflationary pressures in the UK and speculation about two interest rate cuts this year.

Given these expectations and the return of the US market, the path of least resistance for the US Dollar appears to be upward. It is prudent to secure some profits now while staying alert for new trading opportunities.

Good Morning

Trade active

The second sell position triggered; secure position

Trade active

#GBPUSD

Three sell positions running with a minimum of 110 pips in profit; secure some profit as we look out for new trading opportunities.

Trade active

All sell positions from yesterday's session remain active with approximately 170 pips profit amidst a stronger US Dollar. However, reports that the United Kingdom (UK) Retail Sales rebounded by 2.9%, significantly higher than the 1.5% expected, have triggered a fresh recovery attempt this morning.

Retail Sales are a crucial indicator of consumer spending, which constitutes a major component of economic growth. A significant improvement in retail sales, despite the Bank of England (BoE) maintaining higher interest rates, indicates robust demand but also suggests increasing price pressures. Given this context, the potential for buyers to enter the market cannot be overlooked. Therefore, it is prudent to secure some profits from the existing sell positions while remaining open-minded to potential buying opportunities should a reversal setup emerge.

Market participants will now focus on the preliminary UK's S&P Global/CIPS PMI data for June, which will be published in 30 minutes. This data release could provide fresh impetus and further clarify the market's direction.

Stay tuned for further updates as we continue to monitor the market closely.

Good Morning

darcsherry

Trade smart. Trade consciously

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GBPUSD | Perspective for the new week | Follow-up

by darcsherry

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