- GBP/USD gives back much of its intraday gains and turns neutral below the 1.2100 level.
- The BoE’s gloomy economic outlook continues to weigh on the GBP and acts as a headwind for the pair.
- Investors are now looking to this week’s US CPI and UK GDP for further directional momentum.
The pair GBP/USD It is struggling to maintain its modest intraday gains and is down almost 50 pips from the intraday high reached at the start of the European session. The pair is currently trading a few pip points above the daily low, around the 1.2075-1.2070.
The Bank of England offered less than optimistic outlook last week, which continues to act as a headwind to stop the British pound and turns out to be a key factor that capped the GBP/USD pair. In fact, the UK central bank warned that a prolonged recession in the UK would start in the fourth quarter and indicated that monetary policy is not on a pre-established path. This, in turn, suggests that the BoE is more likely to slow its tightening cycle.
On the other hand, US dollar struggles to take advantage of Friday’s sharp rally after NFP, amid a further decline in Treasury bond yields. Apart of this, the positive tone around the stock markets further weighs on the dollar as a safe haven and offers some support to the GBP/USD pair. That said, the prospect of a more aggressive Fed tightening should act as a tailwind for US bond yields, favoring dollar bulls.
The monthly report on employment in the US, published on Friday, showed that the economy added 528,000 jobs in July, far exceeding estimates. Other data revealed that average hourly earnings increased by 0.5% month-on-month in July and suggested a further increase in inflationary pressures, which raised the stakes for a 75 basis point Fed rate hike at the next meeting monetary policy in September.
Therefore, the market’s attention now shifts to the publication of the latest US CPI consumer inflation figures to be released on Wednesday. The data will influence the expectations about the Fed interest rate hike and will play a fundamental role in the demand for the dollar in the short term. Apart from this, investors will take as a reference the preliminary UK GDP report for the second quarter, to be published on Fridayto determine the next directional move for the GBP/USD pair.
Meanwhile, dollar price dynamics will play a key role in influencing the pair’s prices on Monday, in the absence of any relevant data from either the UK or the US. This, in turn, suggests that any significant declines could still find decent support near the psychological 1.2000 level, which should now act as a sweet spot for short-term traders.
GBP/USD technical levels
|last price today||1.2075|
|Today I change daily||0.0019|
|Today’s daily variation in %||0.16|
|Daily opening today||1.2056|
|Previous daily high||1.2164|
|Previous Daily Low||1.2003|
|Previous Weekly High||1.2294|
|Previous Weekly Low||1.2003|
|Previous Monthly High||1.2246|
|Previous Monthly Low||1,176|
|Daily Fibonacci 38.2%||1.2065|
|Daily Fibonacci 61.8%||1.2102|
|Daily Pivot Point S1||1.1985|
|Daily Pivot Point S2||1.1914|
|Daily Pivot Point S3||1.1825|
|Daily Pivot Point R1||1.2146|
|Daily Pivot Point R2||1.2235|
|Daily Pivot Point R3||1.2306|
Source: Fx Street