A strong view
- Buy GBP/USD pair and target a profit at 1.3600.
- Set a stop loss at 1.3300.
- Timeframe: 1-2 days.
A bearish view
- Sell GBP/USD pairs with a target profit at 1.3300.
- Set a stop loss at 1.3600.
The GBP/USD exchange rate has dropped significantly recently, falling from 1.3790 on July 1st to around 1.3430 now. This is its lowest level since June 23rd.
Upcoming US and UK inflation data
The GBP/USD pair continues its downward trend as the US Dollar Index (DXY) has risen, hitting its highest point since June 23rd at $98.11.
We’re now anticipating US inflation data set to release on Tuesday. Economists predict the month-over-month increase to rise from 0.1% to 0.3% in July, and CORE CPI is expected to increase from 0.1% to 0.4%.
Headline CPI should reach around 2.7%, up from 2.4% last month, while core inflation—excluding food and energy—may rise to 3%, up from 2.8%.
If these estimates hold true, it indicates that the headline CPI is moving away from the Federal Reserve’s 2.0% target. This could lessen the chances of interest rate cuts by the Fed.
After that, the GBP/USD rate may react to UK inflation data, where predictions suggest headline and core CPI will stay at 3.4% and 3.5% respectively.
Additional statistics are anticipated showing headline retail sales remaining steady at 0.2% and 4.3% year-over-year, with month-over-month figures unchanged.
GBP/USD Technical Analysis
The daily chart illustrates that the GBP/USD pair has retraced from 1.3790 to approximately 1.3425 recently. It sits slightly below the 50-day Exponential Moving Average (EMA).
The pair tested support around 1.3428, a high from last September, forming a cup-and-handle pattern, which typically indicates a bullish continuation.
Moreover, the relative strength index (RSI) is currently at 50, under the neutral level, while the MACD is also below neutral. So, there’s a possibility of a rebound, testing resistance around 1.3525. However, if it drops below the 100-day moving average at 1.3300, the bullish outlook may be compromised.
