GBP/USD Holds Onto Slight Gains Below 1.3100, Keeping an Eye on US Data.
Fundamental Overview
In the European morning, GBP/USD retains its slight gains below the 1.3100 level, exhibiting a cautious stance without a clear bias. The prospects of a strengthening trend in this major currency pair are underpinned by the divergent policy outlooks of the Federal Reserve (Fed) and the Bank of England (BoE). Prior to the release of important US data, any significant corrective decline could be perceived as a favorable buying opportunity.
Despite experiencing a decline on Friday, the GBP/USD pair managed to record a 2% increase over the course of last week. As Monday begins in Europe, the pair is trading within a narrow range around 1.3100, displaying relative stability.
The US Dollar (USD), which witnessed a substantial sell-off on Wednesday and Thursday, managed to hold its ground against other major currencies leading into the weekend. This was supported by the University of Michigan reporting a notable rise in consumer confidence in early July.
On the other hand, the US Dollar Index struggles to build upon Friday’s recovery and continues to trade below the 100.00 level. The UK’s FTSE 100 Index shows a marginal decline and US stock index futures exhibit mixed trading. In the absence of top-tier data releases, a significant drop in Wall Street’s major indexes after the opening bell might stimulate demand for the USD.
Looking ahead, the UK’s Office for National Statistics is scheduled to release the Consumer Price Index (CPI) data for June on Wednesday. Market participants may prefer to remain on the sidelines and wait for this crucial data, which is expected to show a decline from 8.7% to 8.2% annually, before determining whether GBP/USD has further upside potential.
GBP/USD Technical Analysis Daily Chart
Technical Overview
- GBP/USD is currently trading within an upward channel.
- GBP/USD remains positioned above all Simple Moving Averages (SMA).
- The Relative Strength Index (RSI) indicates a bullish sentiment, while the Stochastic oscillator suggests a downtrend.
- Resistance level: 1.3108
- Immediate support level: 1.3067
How to Trade GBP/USD
The GBP/USD exchange rate demonstrates rapid upward momentum, consistently establishing higher highs. Presently, GBP/USD is trading near the previous day’s high. If the high of the preceding day is breached, the potential for further upward movement in GBP/USD is likely until a trend reversal occurs.
Trade Suggestion:
- Entry at 1.3116
- Take Profit at 1.3142
- Stop Loss at 1.3096
Conclusion
GBP/USD maintains slight gains below the 1.3100 level as market participants closely monitor upcoming US data. The contrasting policy outlooks of the Fed and BoE contribute to the potential for a strengthening trend in the pair. Technical analysis suggests a bullish sentiment, with GBP/USD trading within an upward channel and positioned above all SMAs. Traders may consider a trade suggestion with defined entry, take profit, and stop loss levels. As the UK’s CPI data release approaches, market participants remain cautious and await further economic indicators to gauge the future trajectory of GBP/USD.
Frequently Asked Questions (FAQs)
1. What factors support GBP/USD’s current gains?
- The divergent policy outlooks of the Fed and BoE contribute to the potential for an appreciating move in GBP/USD.
2. How did the US Dollar perform after a significant sell-off?
- The US Dollar managed to hold its own against other currencies following the University of Michigan’s report on increased consumer confidence in early July.
3. What challenges does the US Dollar Index face?
- The US Dollar Index struggles to sustain the recovery observed on Friday and remains below the 100.00 level.
4. When will the UK’s Office for National Statistics release the Consumer Price Index (CPI) data?
- The CPI data for June will be released on Wednesday, providing insights into the potential future movements of GBP/USD.