Current trend

The GBP/USD pair is recovering its positions lost during the corrective decline the day before. The instrument is testing 1.3200 for a breakout, located only 50.0-60.0 points from the record highs of March 2022. Investors are closing some long positions ahead of Friday's inflation data, which could impact expectations for the US Federal Reserve's monetary easing, bracing for the US central bank to begin easing its monetary policy faster than the Bank of England, as official rhetoric suggests.

At the Jackson Hole Economic Symposium, US Treasury Secretary Jerome Powell said it was time to cut borrowing costs, but his British counterpart Andrew Bailey said it was too early to declare victory over inflation in his country. The Services Consumer Price Index, which officials watch particularly closely, remains above 5.0%, and in the last three months ending in June 2024, Average Weekly Earnings excluding Bonus increased 5.4% compared to the same period last year, and were 0.4% lower than in the previous three-month period (ending May), which is the lowest since August 2022. According to research from the UK Institute of Human Resources and Development, employers are planning pay increases of only 3.0%, which is also the lowest figure in the last two years.

In turn, the markets have virtually no doubt about the September reduction of the interest rate by the US Federal Reserve, which was actually announced by Jerome Powell at the end of last week, but without specifying the volume of the upcoming adjustment and clarifying the likelihood of additional changes in monetary policy before the end of the year. This may be partly influenced by inflation statistics, namely the July data on Personal Consumption Expenditure Price Indices, which will be released on Friday: forecasts suggest a slight increase in the Core PCE from 2.6% to 2.7%, and in the PCE itself from 2.5% to 2.6%.

In the UK, July Consumer Credit figures are due to hit the market on Friday, with the figure expected to rise from 1.162 billion pounds to 1.300 billion pounds, and Net Lending to Individuals expected to slow down from 3.8 billion pounds to 3.4 billion pounds. In turn, Mortgage Approvals will likely increase from 59.976 thousand to 60.500 thousand.

Support and resistance

Bollinger Bands on the daily chart show a steady increase. The price range is narrowed from below, being spacious enough for the current activity level in the market. MACD indicator is trying to reverse into the descending plane, keeping the previous buy signal (located above the signal line). Stochastic is showing a more confident downward reversal and is currently leaving the overbought area, indicating continued risks of the pound being overbought in the ultra-short term.

Resistance levels: 1.3250, 1.3300, 1.3375, 1.3435.

Support levels: 1.3188, 1.3150, 1.3100, 1.3050.

Trading tips

Long positions can be opened after a breakout of 1.3250 with the target of 1.3375. Stop-loss — 1.3188. Implementation time: 2-3 days.

A rebound from 1.3250 as from resistance, followed by a breakdown of 1.3188 may become a signal for opening of new short positions with the target at 1.3100. Stop-loss — 1.3250.