Current trend

The GBP/USD pair has been actively increasing for the second week and reached the five-month high of 1.2870 today.

Positive dynamics are developing against the British gross domestic product (GDP) release. The indicator increased by 0.4% MoM instead of the predicted 0.2% and by 1.4% YoY instead of 1.2%, which contributes to the preservation of the risks of accelerating inflation and, accordingly, reduces the likelihood of the Bank of England starting to reduce the cost of borrowing in August. Officials hint at the possibility of further maintaining interest rates at current levels, which helps to strengthen the pound. Thus, yesterday, representatives of the department Catherine Mann and Hugh Pill announced the continuation of price pressure in the economy, especially in the service sector, and a significant increase in wages, which at the moment makes a correction of monetary policy unlikely.

Meanwhile, the likelihood of the US Fed starting to cut interest rates soon has been increasing lately, negatively affecting the American dollar. GDP growth is slowing down, and the labor market is showing signs of cooling, which creates conditions for a transition to a “dovish” rate. Today, at 14:30 (GMT 2), investors will pay attention to June inflation statistics. If the trend is confirmed, the first change in the cost of borrowing in August will become almost inevitable. The head of the regulator, Jerome Powell, told Congress that untimely or insufficient monetary policy easing could weaken economic activity and reduce employment.

Support and resistance

The trading instrument is close to 1.2890 (Fibonacci correction 61.8%). Its breakthrough will ensure an increase to the target of 1.3060 (Murrey level [6/8], H4). In case of overcoming 1.2695 (Murrey level [8/8]), supported by the middle line of Bollinger bands, a decline to the area of ​​1.2573 (Murrey level [7/8]) and 1.2451 (Murrey level [6/8]) is possible.

Technical indicators confirm the probability of further price growth. Bollinger bands reverse upwards, the MACD histogram grows in the positive zone, and Stochastic is in the overbought zone, not excluding a limited correction.

Resistance levels: 1.2890, 1.3060.

Support levels: 1.2695, 1.2573, 1.2451.

Trading tips

Long positions may be opened above the 1.2890 level, with the target at 1.3060 and stop loss 1.2790. Implementation period: 5–7 days.

Short positions may be opened below 1.2695, with the targets at 1.2573, 1.2451 and stop loss 1.2775.