Latest trends

The pound has lost value during the Asian session on August 2, building on the strong “downward” momentum that emerged after the Bank of England monetary policy meeting results were announced. Currently, the price is testing 1.2720 for a decline, renewing the local lows from July 3.

The day before, the regulator cut its benchmark interest rate from a 16-year high (5.25%) to 5.00%: the decision was in line with analysts' consensus forecasts, while market participants had priced the move at around 60.0% just before the meeting. Five of the nine members of the Monetary Policy Committee, including Bank of England Governor Andrew Bailey, have supported cutting borrowing costs amid weakening inflation, which has fallen to its 2.0% target from a 41-year high of more than 11.0% in 2022. Andrew Bailey said the Bank of England would proceed cautiously, with a pause in adjustments as policymakers sought to avoid cutting rates too quickly or too significantly. Inflation is projected to rise from 2.0% to 2.75% in the next quarter as the effects of the sharp drop in energy prices begin to fade, returning to target only in early 2026. Meanwhile, the pound received some support on Thursday from the UK Manufacturing PMI data from S&P Global: in July, the index rose from 51.8 points to 52.1 points, beating the neutral forecast. At the same time, similar American statistics turned out to be mixed, with the S&P Global Manufacturing PMI in July slightly up from 49.5 points to 49.6 points, and the ISM PMI fell from 48.5 points to 46.8 points with a preliminary reading of 48.8 points.

Support and resistance

On the daily chart, Bollinger Bands show a downward reversal. The price range is actively expanding; however, it currently fails to capture the surge of “bearish” sentiment. MACD maintains a strong sell signal, located below the signal line and trying to consolidate below the zero level. Stochastic, having turned down again, is rapidly approaching its lows, which indicates the risk of the pound becoming oversold in the very short term.

Resistance levels: 1.2730, 1.2776, 1.2817, 1.2860.

Support levels: 1.2700, 1.2650, 1.2600, 1.2568.

Trading tips

Sell positions can be opened after the breakdown of 1.2700 with a target of 1.2600. Stop-loss at 1.2750. Implementation time: 1-2 days.

Rebound from 1.2700 as support followed by breakout of 1.2730 could be a signal to open new buy positions with target at 1.2817. Stop-loss at 1.2690.