Current trend

The GBP/USD pair is trading with negative dynamics, testing 1.3120 for a breakdown. The pound is returning to decline after a hesitant attempt at a corrective rise yesterday, when US trading floors were closed for the Labor Day holiday.

Macroeconomic statistics released in the UK on Monday did not provide any additional support to the national currency. The S&P Global UK index rose from 52.1 points to 52.5 points, the highest value since June 2022, which coincided with analysts' expectations. Positive dynamics are also recorded in the manufacturing sector: price pressure on companies and customers is easing, as costs for imported resources slowed down in August after rising for eight months in a row due to supply constraints and higher shipping costs. Today, the pound is receiving some support from Retail Sales data from the British Retail Consortium (BRC): Like-For-Like Retail Sales in August increased from 0.3% to 0.8%.

Today at 16:00 (GMT 2), American investors will focus on the Manufacturing PMI from S&P Global and the Institute of Supply Management (ISM): experts expect a moderate increase in the ISM indicator in August from 46.8 points to 47.5 points, while the S&P Global index will probably remain at 48.0 points. Later in the week, the Automatic Data Processing (ADP) report on private sector employment will be released, as well as final data from the US Department of Labor, which could adjust investor expectations regarding the extent of the expected reduction in borrowing costs by monetary authorities during the September meeting. Currently, only about 30.0% of analysts expect the interest rate to change by –50 basis points.

Support and resistance

Bollinger Bands on the daily chart show a steady increase. The price range is actively narrowing, reflecting ambiguous nature of trading in the short term. MACD is going down preserving a stable sell signal (located below the signal line). Stochastic maintains similar dynamics; however, the indicator line is located in close proximity to its lows of the indicator, indicating significant risks of oversold British pound in the ultra-short term.

Resistance levels: 1.3150, 1.3188, 1.3250, 1.3300.

Support levels: 1.3100, 1.3050, 1.3000, 1.2948.

Trading tips

Short positions may be opened after a breakdown of 1.3100 with the target at 1.3000. Stop-loss — 1.3150. Implementation time: 2-3 days.

A rebound from 1.3100 as from support followed by a breakout of 1.3150 may become a signal for opening new long positions with the target at 1.3250. Stop-loss — 1.3100.