Current trend

The GBP/USD pair is retreating from the March 2022 highs, renewed yesterday, and is testing the level of 1.3240 for a breakdown.

The dynamics of the pound in the middle of the week are associated with the reaction of investors to the household spending report, where the average weekly figure was 567.7 pounds, 7.0% higher than the previous year. The largest decrease was observed in the food and non-alcoholic beverages categories, the share of total spending on key categories returned to 2020 levels, and the value for cafes and restaurants continues to decline, breaking the 2020 low. The average wage of workers decreased by 3.0%, reflecting a decline in purchasing power.

Meanwhile, Bank of England Governor Andrew Bailey during the Jackson Hole Economic Symposium said that inflation had not yet been defeated but has slowed significantly, falling from a 41-year high of 11.1% in October 2022 to 2.0% in May and June. Key data is expected on Friday, when July consumer lending data may increase from 1.162B pounds to 1.3B pounds, supporting the national currency.

The American dollar is trading at 100.40 in USDX. Investors have not yet decided on a long-term position on the US Fed’s interest rates, suggesting a higher probability of a cut by at least 25 basis points. The US currency was supported by macroeconomic reports yesterday: the August Conference Board consumer confidence indicator rose to 103.3 points from 101.9 points, and the S&P/CS Composite–20 housing price index corrected by 6.5% in July, while analysts expected 6.2%. Today, data on the 30-year mortgage rate, which was 6.50% last week, will be important for assessing the prospects of the American market. If it continues to decline, a reverse trend from the dollar may follow, at least in the short term.

Support and resistance

On the daily chart, the trading instrument is correcting, retreating from the resistance line of the ascending channel 1.3180–1.2800.

Technical indicators are strengthening the buy signal: fast EMA on the Alligator indicator crossed the signal line upwards, and the AO histogram is forming correction bars, rising in the buy zone.

Resistance levels: 1.3280, 1.3470.

Support levels: 1.3180, 1.3000.

Trading tips

Long positions may be opened after the price rises and consolidates above 1.3280, with the target at 1.3470. Stop loss — 1.3200. Implementation period: 7 days or more.

Short positions may be opened after the price falls and consolidates below 1.3180, with the target at 1.3000. Stop loss — 1.3250.