Current trend

The GBP/USD pair has been growing for the second week in a row and is currently testing the 1.2890 mark (61.8% Fibonacci retracement). The US currency came under pressure after the publication of July data on wholesale and consumer inflation: YoY, the producer price index (PPI) fell from 2.7% to 2.2% and the consumer price index (CPI) – from 3.0% to 2.9%.

A decrease in inflationary pressure in the economy gives the US Federal Reserve grounds for the first interest rate cut in September, which is hinted at by the comments of the regulator's officials. So, the president of the Atlanta Federal Reserve Bank (FRB), Raphael Bostic, said that the regulator should not be late with the start of monetary policy easing, and St. Louis Fed President Alberto Musalem noted that the adjustment of the current monetary policy looks appropriate given the growing confidence in the return of inflation to the target of 2.0%. Given these conditions, experts believe that the first reduction in the cost of borrowing from the US Federal Reserve by 50 percentage points.

Unlike the American regulator, further easing of monetary policy by the Bank of England (BoE) still looks uncertain. The fact is that in July, the CPI increased from 2.0% to 2.2%, while the labor market remains strong, maintaining the risks of accelerating inflation. Recall that in June, unemployment unexpectedly fell from 4.4% to 4.2%, employment increased by 135.0 thousand with a forecast of 14.5 thousand, and the average level of wage growth far exceeded the inflation targets of the regulator. Under these circumstances, BoE officials may well postpone the reduction of the key rate indefinitely, which will support quotes in the medium term.

Support and resistance

Now the price is close to 1.2939 (Murrey level [4/8]), the breakout of which will open the possibility for continued growth towards the targets of 1.3061 (Murrey level [6/8]), 1.3122 (Murrey level [7/8]). The key for the "bears" is the level of 1.2817 (Murrey level [2/8]), supported by the central line of Bollinger Bands, consolidation below which will ensure the resumption of the decline to 1.2695 (Murrey level [0/8]), 1.2573 (Murrey level [2/8]).

Technical indicators do not give a clear signal: Bollinger Bands are pointing downwards, and Stochastic is directed up, although it enters the overbought zone, while MACD has moved into a positive zone.

Resistance levels: 1.2939, 1.3061, 1.3122.

Support levels: 1.2817, 1.2695, 1.2573.

Trading tips

Long positions can be opened above 1.2939 with targets of 1.3061, 1.3122 and stop-loss around 1.2870. Implementation period: 5–7 days.

Short positions should be opened below the level of 1.2817 with targets of 1.2695, 1.2573 and stop-loss near 1.2890.